O'PEEP'S DAYS OF INVENTORY EXPLANATION
You wonder how much milk to buy, so you are looking into your fridge? Unconsciously you calculate the DOI. DOI gives you an idea of how long the goods in your warehouse (or fridge) will last. In case your stock of milk will last for four months or longer, fingers crossed it is long-life milk! DOI also helps figure out which goods we might have too much.
Days of Inventory (DOI) is a Lean Metric that can be used to see how long the current inventories of raw materials and intermediate goods – i.e. Work in Process (WIP) – will last. Moreover, DOI can also be used to express how long it takes the company to sell its inventory of finished goods.
Understanding DOI is critical to making processes “Lean” as it allows for better planning and helps spot excess inventory. Thus, it is a basic tool to develop a Just-in-Time (JIT) supply chain strategy.
DOI helps us balance the cost of inventory and supply risk. For materials or parts that have a constraint supply or that are crucial to you, bear in mind that it might be worth having more stock and therefore a higher DOI.
HOW TO CALCULATE DAYS OF INVENTORY
O´Peep would like to find out how long his stocks of Gin will last. Of course, he uses DOI to find out. Let’s help him.
We should care less about DOI, and more about telling him it is a bad idea to drink so much! What about buying pure tonic?