With 30 to 60 days sales in inventory, your company's ratio is somewhat below the average for distributors. This may be typical of your industry: companies dealing in commodities, for example, generally have few days sales in inventory.
Between 60 and 90 days sales in inventory is generally considered typical for companies in distribution. Still, there is considerable variation: companies selling a limited number of standard goods, because they can match their purchases to sales, tend to have fewer days sales in inventory. Companies producing specially ordered or seasonal goods, on the other hand, tend to have relatively more days sales in inventory. Food wholesalers and retailers have fewer days sales in inventory, because their raw materials will spoil if they are kept too long, while steel distributors can stockpile for a long time.
You probably do not face a great danger of running out of merchandise. However, if your products are only produced seasonally you may have trouble getting more goods in time to meet some orders. Similarly, if you have to purchase in large quantity, either to get acceptable prices or because of shipping problems, you may have to order far in advance to get the quantities you want.
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You should also look at the factors that might be making your days sales in inventory higher than it should be for a company in your industry. Such factors include: (1) products purchased regardless of whether they are or will be ordered, because of poor coordination between sales and purchasing; (2) fewer sales and therefore more inventory than anticipated, because of an unforeseen industry downturn; (3) a seasonal buildup in inventory (increased inventory in anticipation of Christmas sales, for example), that will be worked off as seasonal sales are shipped; (5) stocks of obsolete merchandise; and the like.
