Days inventory outstanding (DIO) is the time it takes to convert inventory into revenue. It is a measurement of the operational performance of the supply chain with financial implications to a business, most notably working capital and cash flow—the lower the DIO, the better. Less capital tied up in the operations of the business means increased financial dexterity, profitability, liquidity, and investment in strategic imperatives. A one-day improvement in DIO translates to a 2.7M working capital benefit per 1B in cost of goods sold.
Compare your DIO to the Industry Top Performers Benchmark below to determine your supply chain improvement opportunity. While each business is unique, these industry benchmarks can provide insights into the possible and potential targets for your organization to strive for. If improvement opportunities exist, organizations are encouraged to identify the root cause and gaps to best practice, quantify the benefit opportunity, define the corrective action, and execute.
Public financial statements from S&P Capital IQ, 2017, Global, Sample Size: 22,000, DIO greater than 0 and less than 300, ‘Industry’ = Capital IQ classification, Top Performers = lowest quartile performance (25%) in sample size, DIO = Inventory ÷ COGS x days in time period