What is Inventory coverage?
Inventory coverage shows how long available stock will last at the expected demand rate. It makes overstock and impending stockouts comparable. A forward-looking calculation is more useful than one based only on historic averages.
Formula
Inventory coverage = available inventory ÷ forecast daily demand
Practical example
1,200 available units at a forecast of 40 units per day equal 30 days of cover.
What teams should remember
- Inventory coverage shows how long available stock will last at the expected demand rate.
- It makes overstock and impending stockouts comparable. A forward-looking calculation is more useful than one based only on historic averages.