Months of stock: how to calculate it and read a low number

Months of stock is one of the most useful numbers in a health or humanitarian supply chain, because it turns a quantity into time. "We have 450 boxes" says little on its own. "We have one and a half months" tells you whether to relax, reorder, or pick up the phone. This article shows how to calculate it, how to read a low (or high) figure, and where to find it for your OpenBoxes stock in OpenBoxes Lift.

All the products and figures below are invented examples, chosen to make the arithmetic easy to follow.

The formula#

Months of stock is stock on hand divided by average monthly consumption:

months of stock = stock on hand ÷ average monthly consumption (AMC)

AMC is usually the average of the last few complete months of what was actually used or issued to patients or wards. Three months is a common window: long enough to smooth out one odd month, short enough to follow a real change in demand.

Example 1: a clinic store#

A clinic store issued these quantities of an antibiotic over three complete months:

• June: 240
• July: 300
• August: 360

Total: 900. AMC = 900 ÷ 3 = 300 a month.

On a day in September the store holds 450. Months of stock = 450 ÷ 300 = 1.5 months.

Correct for days you were out of stock#

A product that was out of stock for part of the window looks less used than it really is, because nobody could take what was not there. That makes AMC too low and months of stock too high, exactly when you most need an accurate number.

A standard correction is to scale consumption up to the days the product was actually available:

adjusted consumption = consumption × (days in period ÷ days in stock)

Example 2: adjusting for a stock-out#

Over a 90-day window, a store used 250 units of a product but was out of stock for 15 of those days, so it was in stock for 75.

• Unadjusted AMC: 250 ÷ 3 = 83.3 a month.
• Adjusted consumption: 250 × (90 ÷ 75) = 300 for the 90 days, so adjusted AMC = 300 ÷ 3 = 100 a month.

With 150 units on hand, the unadjusted figure says 150 ÷ 83.3 = 1.8 months. The adjusted figure says 150 ÷ 100 = 1.5 months. The difference is the stock-out hiding real demand.

Reading the number against your policy#

Months of stock is most useful against a stocking policy expressed in months. Many health programmes use a maximum-minimum system: a minimum below which you order, and a maximum you order up to. The right levels depend on your lead time, how often you review stock and how much safety stock you need, so the figures below are an example only.

Example 3: ordering up to a maximum#

Suppose the policy for the clinic in example 1 is a minimum of 2 months and a maximum of 4 months.

• At 1.5 months, the store is below its minimum, so it should order.
• Maximum stock = 4 × 300 = 1,200.
• Order quantity = maximum stock minus stock on hand minus anything already on order.
• With nothing on order: 1,200 − 450 = 750.

The same policy in units would be a minimum of 600 and a maximum of 1,200. Expressing it in months means the thresholds move automatically as consumption changes, as long as you recalculate AMC.

What a low number is telling you#

A low figure is a question, not an answer. The usual causes are:

• Demand rose. Check whether the last month was much higher than the ones before it, and whether that is likely to continue.
• A delivery is late. Months of stock falls steadily when nothing arrives. Check the open orders for that product.
• The minimum is set too low for the lead time. If the store regularly drops under one month before stock arrives, the minimum does not cover the time it takes to resupply.
• The data is incomplete. If issues are recorded late or in batches, stock on hand can be overstated and AMC understated, or the other way round. A number is only as good as the transactions behind it.

What a high number is telling you#

A high figure matters too, especially for products with an expiry date. Compare months of stock with the time left before the stock expires.

Example 4: stock that will not be used in time#

A store holds 700 units of a product with an AMC of 50, so months of stock = 700 ÷ 50 = 14 months. One lot of 500 units expires in 6 months.

In 6 months the store will use about 6 × 50 = 300 units. Even if every one of them comes from the expiring lot, 500 − 300 = 200 units are at risk of expiring on the shelf. That is the moment to redistribute to a site that uses more, or to agree a return, rather than the week before the date. Picking the earliest-expiring lot first (see FEFO explained) is what makes the "every unit from the expiring lot" assumption hold.

Two cautions#

• A central warehouse does not consume. It transfers stock to other sites. If you count transfers as consumption at the warehouse and consumption again at the sites, you count the same demand twice. Calculate months of stock where the stock is used, or be explicit about which figure you use at the warehouse.
• New products have no history. Until you have enough complete months, any AMC is a guess. Say so rather than showing a precise-looking number.

Months of stock in OpenBoxes Lift#

The Reports page in the portal shows months of stock on its Stock-outs and below minimum card, for each product and location that is at zero or below its minimum today. It is included on every plan.

It is calculated as the quantity on hand divided by the average monthly issues and consumption over the 3 complete calendar months before the current month. In September, that means June, July and August, as in example 1. Transfers to your other locations, returns, receipts, adjustments and losses do not count as use, which avoids the double counting described above.

A figure under one month is flagged Under 1 month. Instead of a number, the card can also read:

• Not enough history, when one of those three months is not fully covered yet. This is normal on a new account until three full months have passed.
• Only transfers to your other locations (not counted), which is typical of a central warehouse that supplies your other sites.
• No issues or consumption in 3 months.

Limits to know:

• It is the plain ratio. The figure is not adjusted for days a product was out of stock, so for a product that ran out during those three months, apply the correction from example 2 yourself.
• It is not live. The page is built from a once-a-day check of your instance, after 04:00 in your timezone. Anything you record after the check appears the next day.
• It differs from OpenBoxes' own figures. The Reporting menu inside OpenBoxes has its own months-on-hand figures, worked out from requisition demand over the last year. The two answer slightly different questions, so do not expect them to match.

Each card on the Reports page has a CSV download with the same rows, if you want to apply your own policy in a spreadsheet. The Reports guide describes every card, and the OpenBoxes reporting guide covers the reports inside OpenBoxes, including the Consumption report, which shows monthly totals and an average monthly consumption.

Summary#

• Months of stock = stock on hand ÷ average monthly consumption.
• Correct AMC for days out of stock, or a shortage will hide itself.
• Read it against a minimum and maximum in months, and against expiry dates.
• In Lift, the Reports page shows it only for the rows on its Stock-outs and below minimum card (products at zero or below their minimum), based on the last 3 complete months.