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MOI Formula:
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Months Of Inventory (MOI) is a key metric in inventory management that calculates how long current inventory levels will last based on current sales rates. It helps businesses optimize inventory levels and avoid stockouts or overstocking.
The calculator uses the MOI formula:
Where:
Explanation: The formula divides total inventory by the average monthly sales rate to determine how many months the current inventory will last.
Details: MOI is crucial for inventory planning, cash flow management, and ensuring optimal stock levels. It helps businesses maintain the right balance between having enough inventory to meet demand and avoiding excessive carrying costs.
Tips: Enter current inventory in units and average monthly sales in units per month. Both values must be positive numbers greater than zero for accurate calculation.
Q1: What Is A Good MOI Value?
A: Ideal MOI varies by industry, but generally 1-3 months is considered healthy for most retail businesses. Lower values risk stockouts, while higher values indicate overstocking.
Q2: How Often Should MOI Be Calculated?
A: MOI should be calculated monthly or quarterly to track inventory trends and make timely adjustments to purchasing and production plans.
Q3: What If Monthly Sales Fluctuate?
A: Use a 3-6 month average of monthly sales for more accurate MOI calculation, especially in seasonal businesses.
Q4: How Does MOI Differ From Inventory Turnover?
A: MOI measures how long inventory will last, while inventory turnover measures how many times inventory is sold and replaced during a period. They are related but provide different perspectives.
Q5: Can MOI Be Used For Service Businesses?
A: MOI is primarily for businesses with physical inventory. Service businesses may use similar concepts for resource allocation and capacity planning.