The coverage day is an indicator used to assess a company’s stock availability in relation to projected demand. It represents the number of days for which the available stocks are estimated to be sufficient to meet customer needs without replenishment.
The coverage day is calculated by dividing the quantity of available stocks by the average daily demand. This helps determine how long the current stocks could last in the absence of new inputs. A high coverage day indicates that the company has an adequate stock reserve, which can help prevent stockouts and maintain customer satisfaction.
On the other hand, a low coverage day can signal a risk of shortage and require special attention to adjust stock levels or plan for replenishments. The goal is to optimize the coverage day to balance storage costs and operational needs.