Inventory Calculator

Inventory management metrics that matter for Australian wholesalers and distributors

For manufacturers, distributors, and importers, inventory management is directly tied to cash flow and gross margin. Holding too much stock ties up working capital that could be deployed elsewhere — and you pay storage, insurance, and handling costs on every pallet sitting idle. Hold too little and you risk stockouts, lost sales, and damaged customer relationships. The goal is finding the optimal balance: enough stock to meet demand reliably, no more than necessary to do so.

Inventory turnover — COGS divided by average inventory — is the headline metric. It tells you how many times you sell through your entire stock in a given period. Australian wholesale distributors typically target 6–12x annual turnover depending on the product category. Days Inventory Outstanding (DIO), the inverse metric (365 ÷ turnover), tells you how many days stock sits on hand before it is sold. A DIO of 45 means you carry 45 days of stock on average. High DIO relative to your peers is a signal to review ordering patterns and supplier lead times.

For businesses importing from overseas suppliers — particularly from Asia with 30–60 day sea freight lead times — reorder points and safety stock calculations are critical. Placing an order too late means a stockout before goods arrive. The reorder point formula (average daily demand × lead time in days + safety stock) gives you the exact inventory level at which to trigger a purchase order, accounting for demand variability and supplier reliability.

How to use this inventory calculator

1. For inventory turnover: enter your COGS for the period and your average inventory value (opening + closing ÷ 2). The calculator returns turnover ratio and DIO.
2. For EOQ: enter your annual demand in units, cost per order (freight, admin), and annual holding cost per unit (storage, insurance, cost of capital). EOQ gives you the order quantity that minimises total inventory cost.
3. For reorder point: enter average daily demand, supplier lead time in days, and your safety stock level. The result tells you when to place the next purchase order.
4. Compare results against prior periods or industry benchmarks to identify whether inventory levels are improving or deteriorating.

What is a healthy inventory turnover ratio for Australian distributors?

It varies by category. Fast-moving consumer goods (FMCG) distributors typically turn inventory 12–20x per year. Industrial parts and components distributors: 4–8x. Food and beverage: 10–20x. Furniture and homewares: 4–6x. A ratio that is unusually low relative to your peers suggests either slow-moving stock, over-ordering, or obsolete inventory that needs to be written down. A ratio that is unusually high can indicate you are frequently running lean and risk stockouts.

What is safety stock and how much should I hold?

Safety stock is buffer inventory held to absorb unexpected surges in demand or delays in supply. A simple formula: safety stock = Z × σ × √L, where Z is a service level factor (1.65 for 95% service level), σ is the standard deviation of daily demand, and L is lead time in days. For Australian businesses relying on overseas supply chains — particularly post-pandemic where lead time variability increased — carrying more safety stock than pre-2020 norms may be justified. Calculate the cost of holding extra stock against the cost of a stockout (lost margin + customer attrition) to find the right level.

How does AP automation connect to inventory management?

Accurate inventory costs depend on purchase invoices being captured and processed correctly. When a supplier invoice is delayed, misfiled, or coded to the wrong account, your inventory valuation and COGS figures can be off — distorting your turnover metrics and your gross margin. Automating accounts payable ensures invoices are received, coded, approved, and posted promptly, so your inventory and financial data stays current and reliable.