How To Calculate Months On Hand Inventory

Calculating months on hand inventory is crucial for effective inventory management. It helps determine how long your current inventory will last, enabling you to plan restocking and avoid stockouts or excess storage costs.

1. Enter the average daily usage of the item.
2. Enter the current on-hand inventory quantity.
3. Enter the lead time, in days, for receiving more of this item.
4. Click ‘Calculate’.

The formula for calculating months on hand inventory is:

Months on Hand = (On Hand Inventory / Average Daily Use) * (Days per Month / Lead Time)

Real-World Examples

Let’s say you have a small retail store selling widgets. You sell an average of 50 widgets per day, have 2,500 widgets on hand, and it takes 10 days to receive more widgets.

Months on Hand = (2500 / 50) * (30 / 10) = 150 days or 5 months

Data & Statistics

Average Inventory Turnover Ratios by Industry

Industry	Average Inventory Turnover Ratio
Retail	4.7

Top 5 Countries by Inventory Levels (2020)

Country	Inventory Levels (USD Billion)
United States	2,500

Expert Tips

• Regularly review and update your months on hand inventory calculations to account for changes in demand and lead times.
• Consider seasonality when planning inventory levels.
• Use safety stock to account for unexpected fluctuations in demand or supply.

What is safety stock?

Safety stock is a small amount of inventory held to protect against unexpected fluctuations in demand or supply.

U.S. Census Bureau: Inventory and Sales

National Academies Press: Inventory Management