How Much Inventory Should My Business Have On Hand? A Practical Guide for Retail & DTC Brands

It’s a question that keeps retail founders up at night…and can cost thousands (or even millions) if you get it wrong:

“How much inventory should my business have on hand?”

If only there were a one-size-fits-all formula. But like most things in inventory planning and demand forecasting, the answer is more nuanced.

The good news is you don’t need a crystal ball. You just need the right framework—and a team who knows how to use it. Below, we break down the most important considerations when determining the right inventory levels for your retail or DTC brand. And if you want expert support tailored to your business, the Boon team can help.

Why Finding the Right Inventory Number Matters

In retail, your inventory is your investment. Too much ties up cash flow. Too little leaves revenue on the table.

Having the “right” inventory level means:

You have enough product to meet demand
You protect cash flow for the rest of the business
You avoid unnecessary storage costs
You limit obsolete or unproductive inventory
You reduce the risk of stockouts that damage customer loyalty

When inventory gets out of balance—either direction—the financial impact compounds quickly.

When You Have Too Much Inventory

A real example from a Boon client:

A seasonal apparel retailer loved offering many prints and colors but wasn’t analyzing:

Color productivity
Style productivity
Weeks of supply (WOS)
Sell-through rates

Some SKUs had months of supply with no true demand. Once we completed an assortment productivity analysis, the confusion became clarity.

We helped them:

Identify top-performing styles worth investing in
Reduce long-tail SKUs that weren’t turning
Build a strategy of offering core styles year-round while layering in seasonal fashion colors
Improve vendor costing through strategic depth

The result? A cleaner assortment, lower inventory risk, and more efficient cash flow.

When You Don’t Have Enough Inventory

Ho much inventory should I have — Underbuying is just as costly—especially when it becomes a pattern.

Without enough inventory, you face:
Lost revenue
Poor customer experience
Damaged brand trust
Marketing dollars wasted on sold-out items

One maternity apparel client came to us constantly out of stock. With no sales history and long production lead times, they didn’t know how to forecast demand for raw materials or finished goods.

We built:

A demand planning system
Production lead-time tracking tools
Out-of-stock risk alerts
Forward-looking channel forecasts

The result: They grew rapidly, gained visibility into future, and finally stopped chasing inventory.

Where to Start: Finding the Right On-Hand Inventory Level

There’s no universal formula—but here are foundational principles for both early-stage and established brands.

At Boon, we often recommend carrying around 4 weeks of supply (WOS)—but the real number depends on your:

Lead time
Fulfillment method
Order frequency
Customer repeat rate
Seasonality

An open-to-buy (OTB) tool becomes essential here. It helps you understand:

When to reorder
How much to reorder
How receipts impact cash flow
How on-hand inventory is trending

If you don’t have one, we can build it (or you can grab the one in our Sales + Inventory Planning Toolkit).

If You’re an Established Business

With data on your side, your planning can be more sophisticated. You should consider:

YoY growth
Category & SKU-level productivity
Assortment lifecycle planning
Top-down vs. bottom-up forecasting
Channel forecasting
Core vs. seasonal SKU mix

Top-Down vs. Bottom-Up: Why You Need Both

Top-down planning

Uses market trends, macro data, and historical sales
Helps identify overall budget & high-level forecasts
Saves time but can be subjective

Bottom-up planning

Starts with SKU-level sales and builds up
Provides highly accurate inventory needs
More realistic but time-intensive

The most effective inventory forecasts combine both—and land somewhere in the middle.

(It’s also exactly how we plan for clients.)

Additional Factors to Consider When Determining Inventory Levels

2. Minimum Inventory Levels / Safety Stock

Your reserve inventory to protect against:

Demand spikes
Supplier delays
Stockouts
Lead time variability

Every brand needs a safety stock strategy.

3. Vendor Lead Time

If your vendor takes 4 weeks and you only stock 2 weeks of inventory?
You’re heading into an out-of-stock event.

Lead time is one of the biggest drivers of correct inventory planning.

4. Open-to-Buy (OTB)

OTB helps you:

Forecast receipts
Prevent overspending
Avoid overstocking
Keep inventory flowing

If you don’t have an OTB process, start here. It’s transformational.

5. Cash Flow

Inventory requires cash—and you need capital for much more than product:

Payroll
Rent
Marketing
Operations

Right-sizing inventory protects the balance sheet.

6. Forecast Risk

Not all products grow equally YoY. Looking at variances between:

Forecast vs. actuals
Channels
Categories

…prevents repeating mistakes.

At Boon, we push clients to understand why a forecast deviated—not just by how much.

7. Product Lifecycle

Newness sells. But newness also carries risk.

Understanding:

Core product lifecycle
Fashion product lifecycle
Seasonal relevance

…helps you avoid buying too deep.

8. Inventory Turnover

Inventory turnover becomes meaningful when paired with:

Sales performance
On-hand inventory
Category productivity

It’s one of the clearest indicators of financial health.

9. Expiration or Shelf Life

For CPG, beauty, food, and pet brands, this is non-negotiable.

You must plan inventory with enough remaining shelf life to sell through.

10. Product End Use

Frequency-of-use impacts reorder cadence.

Tissues → frequent repurchase
Furniture → long lifecycle

Don’t ignore this when setting inventory levels.

So…How Much Inventory Should You Have?

The truthful (but unsatisfying) answer: It depends.

But with the right framework, tools, and planning model, you can determine the right inventory level for your brand—and protect your cash flow, profitability, and growth trajectory.

If you want help validating your numbers—or building an inventory strategy from scratch—we’d love to support you.

👉 Book a call with our team at Boon to get clarity, confidence, and a right-sized inventory plan for your business.

How Much Inventory Should You Hold? Weeks of Supply, Open-to-Buy & Stock Levels Explained

How Much Inventory Should My Business Have On Hand? A Practical Guide for Retail & DTC Brands

Why Finding the Right Inventory Number Matters

When You Have Too Much Inventory