E-commerce DIO (Days Inventory Outstanding)

Days Inventory Outstanding (DIO) measures how long it takes for a company to sell its inventory on average. It is calculated by dividing the average inventory by the cost of goods sold (COGS) and multiplying by the number of days in the period. A lower DIO indicates that inventory is moving quickly, while a higher DIO suggests that inventory is sitting on the shelves for longer periods, potentially leading to stockouts or overstocking.

For ecommerce businesses, keeping track of DIO is crucial for ecommerce inventory management. A high DIO could indicate overstocking or slower sales, leading to higher storage costs and reduced cash flow. By optimizing DIO, ecommerce businesses can maintain a lean inventory, reduce carrying costs, and ensure that products are available when customers are ready to buy. Effective inventory management and demand forecasting are essential to reducing DIO and maintaining profitability.

Read our in-depth article about ecommerce days inventory outstanding.