We complement the previous section's working capital analysis with a closer look at the elements that make up each measure. In the case of DSI, we analyze Average Inventory Value and Annual Cost of Goods Sold (COGS). This auxiliary analysis helps us understand whether an increasing DSI is the result of rising inventory levels or decreasing sales. It also helps us detect which product is not rotating frequently enough.
Note
As a warehouse manager, I want to know which items spend the most time in the warehouse and whether this is because there is too much stock or too few sales. This information will help me reduce the amount of unnecessary stock and free up available cash.
Let's combine the related metrics and have them share the same dimension axis, as in the following visualization:
