CPIM Practice Exam

What does "days of supply" measure in inventory management?

1. Average daily usage of inventory

2. The number of days until inventory is depleted

3. Inventory on hand in relation to future sales

4. Inventory on hand converted from units to duration

The correct answer is: Inventory on hand converted from units to duration

"Days of supply" is a critical metric in inventory management that indicates how long current inventory will last based on the average daily usage rate. This measurement helps organizations manage their stock levels effectively by analyzing how many days the inventory on hand can sustain operations before it runs out. The correct answer highlights that "days of supply" measures inventory in terms of duration, which reflects how many days the existing inventory can cover anticipated consumption. This is calculated by dividing the available inventory by the average daily usage, giving a clear perspective on inventory levels relative to consumption rates. The other choices, while related to inventory, do not encapsulate the primary essence of what "days of supply" measures. The average daily usage in inventory is a factor in calculating days of supply, but it does not directly measure it. The number of days until inventory is depleted is also relevant, but it simplifies the concept without incorporating the need for understanding daily usage. Lastly, while inventory on hand in relation to future sales is a consideration, it doesn't accurately represent the specific measurement of days of supply in the context of consumption over time.