Days of cover and sell-through: two quick lessons

Quantities are hard to judge on their own. Is 90 units a lot? It depends on whether you sell 3 a day or 30. The fix is to convert the quantity into time. That is what days of cover does, and it is the quickest gut check in stock control.

Lesson one: days of cover

Take what is on hand, or better, what is available, and divide it by how much you use in a day. The answer is how long you can keep selling if no more arrives.

What it tells you

The number is only useful next to the lead time, the days a supplier needs to deliver. If you have 4 days of cover and the supplier takes 7 days, you will run out before more arrives. If you have 40 days of cover and the lead time is 5, you are carrying more than you need.

Lesson two: sell-through

Sell-through looks at one delivery, or one season's stock, and asks how much of it has sold.

Say you received 200 units of a seasonal item and have sold 150, a sell-through of 75 percent. If that is after a week, brilliant. If it is after three months of a four-month season, you will have 50 units left over, and it is time to think about a discount.

What they are good for

• Days of cover warns you early about stockouts and overstock for each item.
• Sell-through tells you quickly whether a new item or a seasonal buy was a good bet.
• Together they stop you from reordering something that is selling slowly, however low the shelf looks.
• Both can be worked out with a calculator and the numbers you already keep.

Where they mislead

Both assume the future looks like the recent past. A product with a big weekend rush has a daily use that jumps around, so use a longer average, such as the last 60 or 90 days. And a new item with only a week of history can give wild numbers. Treat early figures as a guess.