How fast you sell inventory is a direct reflection of how efficiently your business is running and how much cash you’ve got on hand to grow. If products sit too long, you’re tying up capital, risking markdowns, and clogging your fulfillment process. That’s where Days Sales in Inventory (DSI) becomes a powerful metric.

DSI tells you how long it takes to turn inventory into revenue ; it’s not just an accounting formula, it’s a real-world signal for:

• Smarter purchasing

• Better cash flow

• Tighter growth loop

In this guide, we’ll walk through how DSI works, how to calculate it, how to read what it’s telling you, and how to use it to keep your inventory (and your profit) moving.

What Is DSI, and Why Does It Matter?

Days Sales in Inventory (DSI) (sometimes called days inventory outstanding) is the average number of days it takes for a business to sell its inventory. In simple terms, it measures how long your products sit on the shelves before they move out the door.

Why does it matter? A strong DSI helps businesses:

• Protect cash flow: Inventory is one of your biggest cash drains ; the faster it turns, the faster you get paid and the sooner you can reinvest that capital into growth.

• Optimize purchasing: DSI highlights where you’re over-ordering or under-ordering, helping you align stock levels with actual demand.

• Reduce dead stock: Products sitting on the shelf for too long lose value, especially if they’re trend-sensitive. DSI helps you identify slow products before they become liabilities.

• Improve supply chain agility: Monitoring DSI over time lets you spot issues in forecasting, fulfillment, or vendor lead times so that you can fix them early.

• Strengthen financial decision-making: Lenders and investors often look at DSI when evaluating business health ; this is because a well-managed inventory cycle is a sign of operational control.

DSI gives you visibility into how well your inventory strategy supports your business goals.

How to Calculate DSI

To calculate Days Sales in Inventory (DSI), use the following formula:

DSI = (Average Inventory ÷ Cost of Goods Sold) × Number of Days

Let’s break it down:

Average Inventory
(Beginning Inventory + Ending Inventory) ÷ 2

This is the mean value of your inventory over a period, which smooths out fluctuations. It accounts for inventory changes and avoids misleading snapshots. 

Cost of Goods Sold (COGS)
This is how much it cost you to purchase or produce the goods you actually sold (not total revenue). This should not include marketing, rent, or payroll. It’s only the direct cost of inventory moved during the period.

Number of Days
The time frame you’re measuring, commonly 30, 90, or 365 days.

Example:

Beginning Inventory: $45,000
Ending Inventory: $55,000
COGS: $300,000
Period: 365 days

1. Average Inventory = ($45,000 + $55,000) ÷ 2 = $50,000
   
   

2. DSI = ($50,000 ÷ $300,000) × 365
   
   

3. DSI = 0.1667 × 365 = 60.8 days

So on average, it takes about 61 days to sell through your inventory.

What Does DSI Tell You?

Once you calculate DSI, the next step is interpreting the number. What does it say about your business performance?

Here’s how to read the signals:

But context matters: A super low DSI could also signal frequent stockouts or missed sales due to underordering.
The goal isn’t “as low as possible” ; it’s to find the right turnover rhythm for your product type, pricing model, and customer behavior.

Best Practices for Accurate DSI Tracking

To use DSI as a performance lever, not just a passive metric, you need to ensure the data driving it is reliable. Here’s how to get it right:

Centralize inventory and COGS data
If you’re calculating DSI using disconnected systems (Shopify reports, spreadsheets, accounting software), the margin for error is huge. Use integrated tools that sync COGS and inventory values automatically.

Track it monthly or quarterly
Annual DSI gives a big-picture view, but tracking it monthly reveals real-time trends such as seasonal peaks, slowdowns, or SKU-specific movement.

Monitor across product categories
Don’t average your DSI across everything ; instead track it per category or SKU to identify fast and slow movers more precisely.

Compare to historical baselines
Is your DSI rising or falling? Year-over-year comparisons help identify improvements or inefficiencies in your supply chain.

Pair with other metrics
DSI is most powerful when used alongside:

• Gross margin

• Inventory turnover ratio

• PO accuracy

• Stockout rate

These combined tell a more complete story about inventory health and profitability.

Common DSI Calculation Mistakes to Avoid

Even small missteps can lead to misleading insights. Watch for these traps:

Using revenue instead of COGS
DSI is a cost-based measure ; therefore using sales revenue in the denominator will completely distort your result.

Skipping average inventory
Using only beginning or ending inventory ignores fluctuations. This will mean receiving skewed results that don’t reflect how inventory flowed throughout the period.

Mismatched time periods
Ensure both your inventory and COGS data are pulled from the same date range ; don’t mix quarterly inventory with annual COGS.

Incorrect or outdated COGS
If your COGS is pulled manually or doesn’t reflect real-time data, your DSI will lag behind the truth.

Failing to adjust for product returns
If returned inventory isn’t factored into your COGS and inventory, it can quietly inflate DSI and give you false comfort.

How to Improve Inventory Turnover and Lower Your DSI

If your DSI is trending too high, here’s how to get things moving faster:

• Improve forecasting: Use AI-powered tools to predict demand more accurately and avoid excess stock.

• Move slow sellers: Bundle, discount, or promote to free up capital and shelf space.

• Shorten supplier lead times: Negotiate faster fulfillment or diversify vendors to reduce gaps.

• Adopt leaner models: Consider just-in-time or dynamic reorder strategies to reduce holding costs.

• Watch marketing-to-stock alignment: Don’t push what you can’t fulfill or sit on what you’re not promoting.

  
  

How Tightly Helps You Track and Optimize DSI

Tightly automatically calculates DSI and other key inventory metrics in real time, meaning that you never have to build another spreadsheet again. We bring together your COGS, inventory values, and sales velocity into one smart dashboard that updates daily.

Here’s how we support better inventory turnover:

• Live inventory valuation across all locations

• COGS-aware forecasting and purchase planning

• Demand-based reordering triggers

• PO automation aligned with your sales velocity

• Smart alerts when turnover drops or products stall

Whether you want to speed up product movement, reduce dead stock, or simply see how fast cash is flowing through your inventory, you’ll get the insights you need instantly.

Conclusion

DSI is a mirror for how well your inventory is working for you. The faster your stock moves, the faster your cash flows, and the more you can reinvest in growth.

Smart Shopify sellers use DSI to guide decisions, optimize purchases, and uncover inefficiencies before they turn into revenue loss. The best part? With the right tools, tracking DSI doesn’t have to be a chore.

Your action plan starts now

• Run your DSI calculation using your last 90 days of data

• Compare it to last quarter and industry norms

• Tag your slowest-moving SKUs

• Forecast your next restock cycle based on actual turnover

• Align your planning, finance, and purchasing teams around real DSI benchmarks

Remember

Cash tied up in slow inventory is cash you can’t use to grow. DSI helps you get it moving again.

Take action today

• Sync your inventory and cost data with one real-time platform

• Stop relying on manual turnover math

• Use DSI to guide smarter reorder decisions

• Turn inventory planning into a revenue strategy

Get started with Tightly today