# Inventory Reduction Target and Cash Release Calculator

> Source: https://netray.co/tools/inventory-reduction-target-cash-release-calculator
> Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems.
> Section: Free Tools

## Short answer

Turn a days-of-supply target into cash released, carrying cost saved and the turns you would reach.

## Category

cost-finance

## Audience

- Materials planner
- Controller
- Supply chain manager

## Tool

**Kind:** calculator

**Currency:** $

**Inputs:**

#### Annual cost of goods sold

**Key:** cogs

**Type:** number

**Default:** 24000000

**Min:** 0

**Step:** 100000

**Unit:** $

#### Current inventory value

**Key:** inv

**Type:** number

**Default:** 6200000

**Min:** 0

**Step:** 50000

**Unit:** $

#### Target days of supply

**Key:** target

**Type:** slider

**Default:** 60

**Min:** 10

**Max:** 180

**Step:** 1

**Unit:** days

#### Annual carrying rate

**Key:** carry

**Type:** number

**Default:** 20

**Min:** 0

**Step:** 1

**Unit:** %

#### One-off cost to get there

**Key:** oneoff

**Type:** number

**Default:** 150000

**Min:** 0

**Step:** 10000

**Unit:** $

**Help:** Disposal write-downs, expedite fees, project effort.

**Outputs:**

#### Current days of supply

**Key:** dos

**Expr:** inv / cogs * 365

**Format:** days

#### Current turns

**Key:** turns

**Expr:** cogs / inv

**Format:** decimal

#### Inventory at target

**Key:** tinv

**Expr:** cogs / 365 * target

**Format:** currency

#### Cash released

**Key:** cash

**Expr:** max(0, inv - tinv)

**Format:** currency

**Primary:** true

#### Turns at target

**Key:** tturns

**Expr:** cogs / tinv

**Format:** decimal

#### Annual carrying cost saved

**Key:** save

**Expr:** cash * carry / 100

**Format:** currency

**Primary:** true

#### Payback on one-off cost

**Key:** payback

**Expr:** if(gt(save, 0), oneoff / save * 12, 0)

**Format:** months

**Chart:**

#### Cash released vs target days of supply

**Type:** line

**X:** target

**From:** 10

**To:** 180

**Steps:** 30

**Series:**

- cash

**Disclaimer:** Uses COGS based days of supply. Cash released is a one-time balance sheet effect; carrying cost savings recur annually.

## Content

**Intro:** Finance asks for a number and planners need a target they can defend. This calculator turns a days-of-supply goal into the cash it releases, the carrying cost it saves and how fast the investment pays back.

**Sections:**

#### How to use it

**Body:** Enter annual COGS and the current inventory value from your balance sheet or ERP valuation report. Set a target in days using the slider. The tool shows current days and turns, the inventory value at target, cash released and annual carrying savings. Add any one-off costs, such as write-downs or expedites, to get a payback period.

**Bullets:**

- Use the same inventory scope for COGS and stock value
- Separate raw materials, WIP and finished goods for sharper targets
- Treat the target as a plan, not a guarantee

#### The method

**Body:** Days of supply is inventory divided by COGS, times 365. Inventory at target is daily COGS times the target days. Cash released is the difference. Annual carrying savings is cash released times the carrying rate, covering capital, storage, insurance, handling and shrink. Turns are COGS divided by inventory.

#### Reading the result

**Body:** The chart shows cash released falling as the target moves up. Steep early gains usually come from slow-moving and excess stock, while the last days of supply cost service. Do not set one plant-wide target blindly. Allocate reductions by item class and protect long lead-time critical parts.

#### Common mistakes

**Body:** Teams count a one-time write-down as a saving or ignore the demand lift that follows the program. Others set a target below what lead times physically allow. In SAP, Oracle, Infor or Epicor, pull stock value from the valuation report at period end so it ties to the ledger.

**Cta:** If you want the target broken down by plant, item class and supplier from live ERP data, Netray can build that view.

**Faq:**

#### How is days of supply calculated here?

**Answer:** Current inventory value divided by annual cost of goods sold, times 365. This is a financial view. A demand-based view using forecast usage by item gives a more actionable plan at item level.

#### What carrying rate should I use?

**Answer:** Use your finance team's rate if they have one. Many plants fall between 15% and 30% a year when cost of capital, storage, insurance, handling and obsolescence are included.

#### Is cash release the same as profit?

**Answer:** No. Cash release is a one-time working capital improvement. Profit improves only through the recurring carrying cost saved, plus any avoided write-offs. Both matter, but they should be reported separately.

#### How fast can inventory really come down?

**Answer:** It depends on lead times and open orders. You can cancel or defer purchases quickly, but WIP and long lead items take months to flow through. Plan reductions in phases, not in a single quarter.

## Search terms

inventory reduction calculator, days of supply target calculator, cash release from inventory reduction, working capital inventory reduction, inventory days target, inventory reduction savings, reduce inventory by percent calculator, inventory turns target

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