Consumption Rate: Definition and How to Measure It

The consumption rate of an item is the average daily quantity used, across both sales and non-sales loss. It is the single most important input to replenishment math — PAR, reorder point, days of stock, safety stock all derive from it.

Components of consumption

consumption rate = sales rate + decay rate × on-hand inventory

or, more practically:

• Sales rate — units sold per day, ideally pulled from your POS
• Decay component — daily loss to spoilage, shrinkage, breakage, internal use; see decay rate

How sales rate is computed

For an item sold directly:

sales rate = sum(daily sales over last 30 days) / 30

For an ingredient that goes into recipes (e.g. flour into bread):

ingredient sales rate = Σ (recipe sales rate × recipe yield for this ingredient)

If a sandwich uses 100g of bread and you sell 30 sandwiches/day, the implied bread consumption from that recipe is 3 kg/day. Sum across all recipes that consume the ingredient, then add direct sales (if any), then add decay.

The 30-day window

LineNow uses a 30-day rolling window for consumption calculation. This is a deliberate trade-off:

• Too short (7 days): noisy, over-reacts to weekly spikes
• Too long (90+ days): under-reacts to trend changes, stale through season changes
• 30 days: long enough for stable means, short enough to catch trend

For items with strong weekly seasonality (a Tuesday-spike vs Saturday-spike pattern), the system also uses day-of-week analysis to adjust short-term forecasts.

Intermittent demand

For items that don't sell every day (a specialty bitter that sells 6 times a month), the simple 30-day average understates true demand because zero-days dilute the mean. The Croston/SBA approach separates demand size from demand interval and forecasts them independently:

SBA forecast = (1 − α/2) × (smoothed demand size / smoothed inter-demand interval)

with α = 0.15 typically. This is the bias-corrected version of Croston's method, published in 2005, and is what LineNow uses for non-smooth demand.

Manual override

For items not connected to POS — toilet paper, cleaning supplies, office consumables — you can set the consumption rate manually. The system will use your value verbatim. You can update it any time.

Why this is the foundation

Consumption rate is the input that determines:

• Days of stock: on-hand / consumption rate (with decay adjustment)
• PAR level: consumption rate × order frequency + safety stock
• Reorder point: consumption rate × lead time + safety stock
• Order recommendation: PAR − on-hand + (consumption rate × lead time)

Get consumption rate right and the rest of the system falls into place. Get it wrong and every downstream calculation drifts. This is why we put POS connection at the very top of onboarding — without it, consumption is gut-feel, and the math is back to gut-feel.