What is WOS?
At any given point in time, an online business will need to have just the right amount of inventory to meet the sales planned till the next set of deliveries arrive. In addition to this, they would need to have safety stock to meet the sudden increases in sales and make up for late deliveries by vendors.
WOS, short for Weeks of Supply, is a metric that is essential to retail supply chain management. In the ecommerce line of businesses, it helps online merchants to view inventory in terms of time.
With WOS, inventory managers can know how long the current inventory will remain based on the current sales demand. Based on the inventory on hand and the future projected weekly sales, you can determine how many weeks it will take to sell an item.
This metric especially comes into play for those businesses and the time periods when you expect a mass sales spike.
How do you calculate Weeks of Supply?
It’s relatively easy to calculate weeks of supply. It is calculated by dividing the current inventory on hand by the average sales.
Weeks of Supply = On Hand Inventory ÷ Average Weekly Units Sold
It’s essential to choose the right number of weeks for calculating the ‘average weekly units sold.’ If you haven’t rightly selected the number of weeks, the results you get would be inaccurate.
For this, you would need to take into account the rate at which your demand fluctuates. If the demand is stable, then more weeks can be considered. If your business is seasonal and the demand fluctuates accordingly, you should choose fewer weeks for your calculation.
Another point to keep in mind while calculating weeks of supply is to check with the retail buyer on the demand period they are considering. If you have computed for four weeks and are using six weeks, the order quantities you both arrive at will be different.
You should consider a 4-week window of sales demand if your business is seasonal and 8-10 weeks if it is non-seasonal and if the demand is steady.
Why is Weeks of Supply important for your ecommerce business?
If your online business involves inventory, then a significant chunk of your working capital will go into procuring and storing them. Therefore, it is hugely advantageous if you can ensure a steady flow of goods coming in and going out. Knowing this gives an overview of the health of your business.
Here are some of the critical benefits of calculating weeks of supply :
- It helps minimize inventory stocks and lost sales.
- It helps you plan for additional inventory.
- It helps you schedule your purchases well.
How to optimize your Weeks of Supply?
Weeks of Supply is a measure that looks at past trends versus your future sales projections. Here are some effective strategies for optimizing your weeks of supply:
1. Automate your supply process: An inventory management software will simply do the trick. This way, you may only manually manage certain aspects, and the management software will do the rest.
2. Bring down your supplier lead times: You can control your stock levels by doing this. Focus on this aspect to optimize costs and make sure things are running smoothly.
3. Manage your minimum orders better: Suppose you want to order 200 units of a particular product. Your supplier delivers only in batches of 600 units. You may have to negotiate with your supplier to calibrate it according to the market demand.
4. Measure your performance periodically: Performance analysis is a sure-shot way to improve any business’s functioning. It will help you keep track of weeks of supply and the general health of your business.
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