The average supply period (PMA) is the time that passes from when a company buys raw materials until it introduces them into the production process. Also known as average storage or inventory period.
For example, if the average supply period (PMA) is 15 days, it means that every 15 days on average we must go to our supplier to buy raw materials and incorporate them into the production process. The higher the WFP, the longer the raw materials will remain in the warehouse and as a consequence, the higher the investment in raw materials.
The permanence of raw materials in the warehouse is a key point in the liquidity of the company. From the beginning, it is convenient to reduce this period to a minimum, but bearing in mind that we cannot run out of raw materials, since it would harm us by having to make excessive expenses later on.
Calculation of the average supply period
The supply period (PMA) is found by dividing the average balance of stocks of raw materials in the warehouse by the amount of raw materials consumed throughout the year, and then multiplying it x 360 days a year.
Another way to calculate it is through inventory turnover, which is the number of times the raw materials warehouse is renewed in a year. The rotation will be the quotient between the annual purchases of raw materials and the average stocks of raw materials.
And last step, assuming that a business year equals 360 days, the number of days that stocks have been in storage until they have been used will be obtained by dividing the number of days in the business year by the rotations.