The Procurement Glossary » Days Inventory Outstanding (DIO)

Days Inventory Outstanding (DIO)

Finance & Payments

Also known as: DIO

Definition

The average number of days inventory is held before it is used or sold.

Explanation

DIO shows how long cash is tied up in stock. Lower DIO means leaner, faster-moving inventory and better working capital. With DPO and DSO it forms the cash conversion cycle that finance watches closely.

Example

Cutting safety stock lowers DIO from 60 to 45 days, releasing working capital.

Related terms

• Inventory Turnover — How many times inventory is sold or used and replaced over a period — a measure of inventory efficiency.
• Working Capital — The money tied up in day-to-day operations — broadly current assets (inventory, receivables) minus current liabilities (payables).
• Inventory Carrying Cost — The total cost of holding inventory — capital tied up, storage, insurance, obsolescence and shrinkage.
• Days Payable Outstanding (DPO) — The average number of days a company takes to pay its suppliers.

Frequently Asked Questions

What is Days Inventory Outstanding (DIO)?

The average number of days inventory is held before it is used or sold. DIO shows how long cash is tied up in stock. Lower DIO means leaner, faster-moving inventory and better working capital. With DPO and DSO it forms the cash conversion cycle that finance watches closely.

Can you give an example of Days Inventory Outstanding (DIO)?

Cutting safety stock lowers DIO from 60 to 45 days, releasing working capital.

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