What is the primary difference between inventory turnover and days inventory held (DIH)?

The primary difference lies in the specific metrics each measure provides regarding inventory management. Inventory turnover quantifies how frequently a company sells and replaces its inventory within a specific period. This is a crucial indicator of operational efficiency, as a higher turnover rate means that a business is selling its inventory quickly and thus may be effectively meeting customer demand.

On the other hand, days inventory held (DIH) calculates the average number of days it takes for a company to sell its entire inventory. This metric helps in understanding how long inventory is being held before it is sold. Essentially, while inventory turnover indicates the speed at which inventory is converted into sales, DIH offers insight into the duration that inventory remains in stock before it is sold.

These two metrics serve different but complementary purposes in assessing inventory performance. Thus, recognizing that turnover measures the frequency of sales and DIH tracks the time duration provides a meaningful understanding of how inventory is managed in a business context.