Days Sales of Inventory (DSI): How Long Does Cash Sit on Shelves?
- DSI = 30–45 days for most Indian e‑commerce players; every day adds ₹50‑₹80 lakh to working‑capital costs.
- EdgeOS + Dark Store Mesh cut DSI by 20–30 % by aligning warehousing with demand hotspots.
- NDR Management reduces return‑rate drag, turning slow‑moving stock into quick‑turn inventory.
Introduction
In Tier‑2 and Tier‑3 Indian metros—think Guwahati or Surat—e‑commerce brands face a paradox: high COD (Cash‑on‑Delivery) demand keeps customers happy, but COD also ties up cash whenever a parcel sits on a shelf. While Mumbai’s last‑mile hubs churn out 1,200 orders per hour, Bangalore’s dark‑store mesh now handles 600+ SKUs daily. Yet, many brands still keep inventory days (DSI) above 45, meaning cash is “sitting” on unsold stock. The question: How can we shrink DSI without sacrificing service?
1. What Is Days Sales of Inventory (DSI)?
| Formula | Explanation |
|---|---|
| DSI = (Average Inventory ÷ Cost of Goods Sold) × 365 | Measures how many days inventory is held before sale. |
- Average Inventory = (Opening + Closing Inventory) ÷ 2.
- Cost of Goods Sold (COGS) reflects purchase cost, not retail price.
In India, a high DSI signals either over‑stocking, poor demand forecasting, or slow fulfillment. Each day of excess inventory costs the brand ₹2.5 lakh on average (₹50/day × ₹5,000 average inventory per day).
2. Why Does DSI Matter to Indian E‑Commerce?
2.1 Cash Flow Impact
- COD Burden : 70% of orders in Tier‑1 cities still use COD; each payment is received post‑delivery, delaying cash inflow.
- Working‑Capital Leverage : A DSI of 45 days ties ₹22.5 crore in a mid‑cap brand—roughly 15% of its annual revenue.
2.2 Competitive Edge
- Faster Restocking : Low DSI allows brands to respond to festive spikes (Diwali, Christmas) without stockouts.
- Lower Fulfilment Costs : Smaller inventory leads to fewer returns and lower reverse‑logistics mileage.
3. Problem‑Solution Matrix for Reducing DSI
| Problem | Root Cause | Solution | Outcome |
|---|---|---|---|
| Excess inventory in Mumbai warehouses | Demand spikes mis‑forecasted | EdgeOS predictive analytics | 25 % inventory shrink |
| Slow restock in Tier‑3 cities | Inadequate dark‑store coverage | Dark Store Mesh expansion | 30 % faster replenishment |
| High return volume drags inventory | Poor fit‑check & quality | NDR Management (Return‑Rate Analysis) | 15 % reduction in slow‑moving stock |
4. Leveraging Edgistify’s EdgeOS
4.1 What is EdgeOS?
EdgeOS is a real‑time analytics platform that syncs with your ERP, POs, and courier feeds (Delhivery, Shadowfax). It predicts demand at SKU level across 200+ Indian cities.
4.2 How EdgeOS Cuts DSI
| Feature | Impact |
|---|---|
| Predictive Replenishment | Stock levels auto‑adjust 48 hrs before forecasted demand. |
| Demand‑Heat Mapping | Identifies “hotspots” like Guwahati’s 5‑day sales surge. |
| Dynamic Routing | Optimizes courier pick‑up, reducing idle inventory. |
Case Study: A mid‑size electronics retailer cut DSI from 55 to 38 days in 6 months, saving ₹1.3 crore in working capital.
5. Dark Store Mesh: Bringing Inventory Closer to Demand
5.1 The Concept
- Dark Stores are fulfillment hubs located near high‑density consumer zones.
- Mesh refers to a network of these stores, each acting as a micro‑warehouse.
5.2 Benefits for DSI
- Reduced Transit Time : Orders are fulfilled within 1–2 hrs, lowering the need for large safety stock.
- Localized Forecasting : Store‑level sales data gives granular insights, reducing over‑stocking risk.
Data Snapshot:
- Pre‑Mesh DSI (Bangalore) : 48 days
- Post‑Mesh DSI (Bangalore) : 33 days (31% reduction)
6. NDR Management: Turning Returns into Revenue
6.1 The Challenge
- Return‑Rate (RR) in India averages 4–5% for fashion, 8–10% for electronics.
- Each returned SKU sits idle, inflating DSI.
6.2 How NDR Management Helps
| Step | Action | Result |
|---|---|---|
| 1 | Capture return reasons (fit, defect, wrong SKU) | 70% actionable data |
| 2 | Rapid re‑listing or refurbishment | 50% faster restock |
| 3 | Dynamic discounting | 20% of returns sold within 7 days |
By applying NDR Management, brands can shave 10–12 days off DSI, especially in high‑return categories.
7. Practical Checklist for Shrinking DSI
- Audit Inventory Levels monthly, focusing on SKUs with >60 days on shelf.
- Integrate EdgeOS with your ERP for real‑time demand signals.
- Deploy Dark Store Mesh in Tier‑2 cities experiencing rapid growth (e.g., Pune, Lucknow).
- Implement NDR Management to quickly move returned stock.
- Review COD Policies : Offer digital wallets in Tier‑1 while limiting COD in Tier‑3 if feasible.
Conclusion
Days Sales of Inventory is more than a number—it’s a pulse on your cash health and operational agility. In India’s fast‑moving e‑commerce arena, where COD remains strong and festive surges are relentless, shrinking DSI isn’t optional; it’s survival. By harnessing data‑driven platforms like EdgeOS, expanding your Dark Store Mesh, and mastering NDR Management, you can keep cash flowing, inventory lean, and customers delighted.