Dynamic Storage Pricing & Weeks of Coverage

Modified on Fri, 15 Mar at 8:18 AM

Inventory management is an important part of any e-commerce business. Although product inventory is a business asset, improperly managed inventory can also be very detrimental to an e-commerce business. To prevent excessive inventory/dead stock from negatively impacting your business, byrd has implemented the Weeks of Coverage reporting and Dynamic Storage Pricing. Since the inventory sales ratio is a key performance indicator for e-commerce businesses in general to help improve efficiency and cash flow, we are convinced that our dynamic storage pricing is well aligned with your overall supply chain strategy.

What is “Weeks of Coverage”?

Ratio of inventory quantity held across warehouses divided by total forecasted weekly volume based on historical performance of the last 3 months.

In short, weeks of coverage (WoC) tells sellers how long their current inventory on hand will

last based on sales. This mechanism allows us (and you) to understand and evaluate the health of the inventory levels.

To put that into perspective, the inventory of a healthy e-commerce company is on

average between 12-24 weeks (excluding certain product groups - e.g. fashion).

It’s crucial to keep your lead time for restocking in mind when looking at your weeks of coverage to avoid stock-outs.

How are the Weeks of Coverage and the Dynamic Storage Pricing calculated?

The calculation is based on 3 pillars, taking into account a weighing factor which is also why we call it Weighted Weeks of Coverage:

  • Forecasted weekly volume: Based on the historical (last 3 months) sales/shipment performance. +20% will be added to the forecast volume to cover any growth for the upcoming months.
  • Average stock of the last month
  • Weighing: Ratio of Items shipped/SKU to overall Items sent. The more an SKU has been shipped the more it will be weighted in the calculation.

As a result, the calculation looks like this:

At byrd we define a stock as unhealthy as soon as it exceeds the threshold of 24 weeksIf this threshold is exceeded, the cost of storage is increased by +100%. However, this adjustment remains dynamic, i.e. as soon as the stock level is healthy again, i.e. below 24 weeks, these additional costs do not apply.

What can you do in order to get rid of slow-selling SKUs and reduce your Weeks of Cover?

  • Create bundles: Bundling fast and slow-selling SKUs can be a great way to increase sales of products that aren’t selling well right now. Fortunately, byrd also offers a feature for that which facilitates your daily operations.
  • Discounts: Sometimes it can be cheaper to have discounts for your products rather than paying excessive storage costs.
  • Extend to new marketplaces to sell slow turning SKUs: Some of your products might be suitable for specific marketplaces. Marketplaces in general are a great way to extend your reach and increase your sales with limited investment.

Do you need more support? Feel free to reach out to us and we might have the right partner that can help you!

Your Weekly (Weighted) Weeks of Coverage Report

To help you keep track of your weeks of coverage, we have scheduled a report for you that you will get on a weekly basis every Tuesday with the subject line <your company name> Weeks of Coverage. This will enable you to improve your inventory management in general. The attachment with the report looks like the image you can see below. Keep in mind that the important factor here is the weighted weeks of coverage which are highlighted in turquoise.

→ In the example below, your Weighted Weeks of Coverage amounts to 22.25 (16.18 for 2024-01 and 17.83 for 2023-12).

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