Inventory can tie up 40 to 50 percent of a supply chain's invested working capital, so these KPIs are really about cash and risk. CSCP · M4
Inventory turnover
CSCP · M2
Answers: How many times a year does the money in stock return as sales?
FormulaAnnual cost of goods sold ÷ average inventory
Example (module)$21 million ÷ $3 million = 7 turns. Higher is preferred: less money tied up, less obsolescence risk, more liquidity.
Watch out: "Good" depends on the business. The module cites about 365 for baguettes, under 1 to 4 for slow spare parts, and 6 to 26 for most manufacturing plants. Retail uses value at selling price; commodity sellers use units.
Average inventory
CSCP · M2
Answers: What is the typical stock level that turnover and costs should be measured against?
Formula½ × average lot size + safety stock (steady demand and lots), or the average of several observations, such as twelve month-end balances
Illustrative arithmeticLot 400 units, safety stock 50 → ½ × 400 + 50 = 250 units
Watch out: Averaging only two balance-sheet dates can mislead. Using more points removes the effect of seasonality.
Inventory days of supply (DOS)
CSCP · M2
Answers: If nothing arrived, how many days would current stock last?
FormulaUnits: on-hand units ÷ daily usage
Value: inventory value ÷ average daily COGS
Example (module)2,000 units ÷ 200 per day = 10 days. Cross-check (computed): 365 ÷ 7 turns ≈ 52 days.
Watch out: One DOS figure hides slow items. Check it by ABC class and by item type.
Cash-to-cash cycle time
CSCP · M2
Answers: How many days is working capital tied up between paying suppliers and collecting from customers?
FormulaInventory days of supply + days sales outstanding − days payables outstanding
Example (module)60 + 40 − 45 = 55 days. Reducing inventory directly shortens it.
Watch out: The module calls it more useful than basic turnover because it includes receivables and payables. Adjust for VMI, consignment, or vertical integration before benchmarking.
Carrying (holding) cost rate
CSCP · M4
Answers: What does it cost per year to keep stock?
FormulaInventory value × carrying cost rate. The module says the rate is typically 15% to 40% of value per year and is built from storage, capital, and risk costs.
Illustrative (25% placeholder)$3,000k × 25% = $750k per year. A 10% stock cut would save $75k a year and release $300k of cash.
Watch out: Do not drop the risk part. The module's example assumes a 2% value loss per day from obsolescence, which makes stock older than 50 days worthless.
In-transit inventory
CSCP·R · M4
Answers: How much stock is on the road or at sea that never shows in the warehouse count?
FormulaAverage annual in-transit inventory depends on transit days and annual demand: annual demand × transit days ÷ 365
Illustrative36,500 units a year × 30 days ÷ 365 = 3,000 units in transit at any time
Watch out: Counting only in-stock inventory can omit a significant share of the total. Cut transit time to cut this stock.
Obsolete and slow-moving stock
CONVENTION
Answers: How much of the stock is unlikely to be used or sold?
Formula (convention)Value of obsolete or non-moving stock ÷ total inventory value. The CSCP lists "obsolete inventory" and "inventory by ABC class" as asset metrics but gives no formula.
Illustrative$180k obsolete ÷ $3,000k total = 6%
Watch out: Define "non-moving" (for example no issue in 12 months) before measuring, and link it to the write-off and reserve policy.
Inventory shrinkage
CSCP · M4 formula: CONVENTION
Answers: How much stock disappears through scrap, theft, deterioration, or evaporation?
Definition (CSCP)Reductions of actual quantities of items in stock, in process, or in transit.
Common formula(Book value − physical value) ÷ book value
IllustrativeBook $3,000k, counted $2,970k → 1.0%
Watch out: Tracking systems (WMS in storage, TMS in transit) make losses visible and valuation accurate.