The stock-to-sales ratio compares what you start a month with to what you sell in it: stock-to-sales ratio = stock at the start of the month ÷ sales for the month. Start November with 5,300 cards, sell 2,600, and the ratio is 2.04: two months' worth of stock at that month's pace. It's a planning number, used backwards: decide the ratio you want for each month, multiply by the sales you expect, and you know how much stock to start the month with, and so how much to make before it. Below is the formula, a greeting card maker's season month by month, how to plan with it, how it differs from the inventory-to-sales ratio, and a free calculator.
The short version
- Stock-to-sales = stock at the start of the month ÷ that month's sales.
- Inventory-to-sales = stock at the end of the month ÷ that month's sales.
- Use one unit throughout: units, dollars at cost, or dollars at retail.
- The ratio falls in busy months and rises in slow ones; that's normal.
- To plan: stock to start with = forecast sales × target ratio.
- Make this month = next month's starting stock − this month's + this month's sales.
- TaroStack shows every product's days of cover from how fast it sells; planning what to make from a forecast is on Standard. More below.
The formula
Stock-to-sales ratio = stock at the start of the month ÷ sales for the month
Retailers measure both in dollars at retail; a maker can use units or dollars at cost, as long as both halves use the same one. A ratio of 4 means you started the month with four months of stock at that month's pace; a ratio of 1 means you started with exactly what sold, and one more sale would have found the shelf empty.
An example: a greeting card maker's season
Fox Point Paper Co., a made-up greeting card company in Providence, Rhode Island, I use in these examples, tracks its finished cards in its second autumn:
| Month | Stock at the start | Sold | Printed | Stock at the end | Stock-to-sales | Inventory-to-sales |
|---|---|---|---|---|---|---|
| Sep | 3,600 | 900 | 1,500 | 4,200 | 4.00 | 4.67 |
| Oct | 4,200 | 1,400 | 2,500 | 5,300 | 3.00 | 3.79 |
| Nov | 5,300 | 2,600 | 2,000 | 4,700 | 2.04 | 1.81 |
| Dec | 4,700 | 3,000 | 750 | 2,450 | 1.57 | 0.82 |
| Jan | 2,450 | 700 | 1,500 | 3,250 | 3.50 | 4.64 |
| Feb | 3,250 | 1,500 | 1,750 | 2.17 | 1.17 |
The ratio falls from 4.0 in September to 1.57 in December because the stock was built ahead of the holidays and sold into them, which is the point. January is the one to look at: 2,450 cards left after December against 700 sold makes 3.50, and some of those are holiday cards that won't sell until next November. The card designs that sold out in December and the ones left over are what the next autumn's ratios should be planned from; what to do with stock that won't sell is in obsolete inventory examples.
Planning stock with it
The ratio is most useful forwards. Choose a target ratio for each month from last year, forecast the sales, and the stock to start each month with follows:
| Month | Forecast sales | Target ratio | Stock to start with | Print this month |
|---|---|---|---|---|
| Sep | 1,000 | 4.0 | 4,000 | 1,800 |
| Oct | 1,600 | 3.0 | 4,800 | 2,800 |
| Nov | 3,000 | 2.0 | 6,000 | 2,100 |
| Dec | 3,400 | 1.5 | 5,100 | 700 |
| Jan | 800 | 3.0 | 2,400 |
Make this month = next month's starting stock − this month's starting stock + this month's sales. For October: 6,000 − 4,800 + 1,600 = 2,800 cards to print. The print runs come from that number, and the timing from the printer's lead time, as in lead time calculation formula.
Stock-to-sales and inventory-to-sales
| Stock-to-sales | Inventory-to-sales | |
|---|---|---|
| Stock counted | At the start of the month | At the end of the month |
| Used for | Planning how much to start a month with | Seeing how much is left over |
| Who uses it | Buyers and makers, for planning | The U.S. Census Bureau publishes it for whole industries |
Both are "months of stock at this month's pace"; the census figure is the one in the news, and the planning ratio is the one a buyer uses. Planning stock around a busy season is in seasonal inventory, and the same idea over a whole year in inventory turnover example.
What a good stock-to-sales ratio is
There's no single good number, because it depends on the season and the lead time. A ratio above the month's lead time in months is a cushion; one below it risks selling out before the next run arrives. The useful benchmark is your own months last year: if January's ratio is 3.5 again, the holiday print runs were too big.
Get the calculator
Download the stock-to-sales calculator. Two sheets: by month, where you type the first month's starting stock and each month's sales and what was made or received, and the stock at the start and end and both ratios fill in; and a plan, where a forecast and a target ratio give the stock to start each month with and how much to make or buy. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
The calculator works on one total for all thirty designs. The trouble is in the designs: the snowy owl card sells out in November while 400 of the lobster wreath sit until next year. A ratio for each design means thirty rows, each month, from counts and sales that live in different places.
How TaroStack does it
TaroStack shows every product's days of cover from how fast it sells; planning what to make from a forecast is on Standard.
Days of cover for every design. Every sale and every print run moves the stock as it happens, so each card's days of cover is worked out from how fast it sells, and the reorder list puts the ones that will run out first at the top.
Making from a forecast. On Standard, planning says what to make and what to buy from a forecast, so the autumn's print runs come from the expected sales, design by design.
Sales by product and customer. Every shop's order is a sales order, and margins are reported by product and customer, so the designs that sell and the ones that don't are a report.
| The job | Spreadsheet | In TaroStack |
|---|---|---|
| Stock for each design | Count the boxes | Stock as it moves |
| Which designs run out first | Work out each one | Reorder list in days of cover |
| How much to print for November | Forecast × ratio | Planning from a forecast, on Standard |
| Which designs sell | Add up the orders | Sales by product and customer |
Stock, reorder lists and sales orders are on every plan, from $49 a month; planning is on Standard at $99. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.