The conversion of monetary value of inventory to time is done by using the term called DIOH.

“A day” in this conversion means the value of average day of sales. For a TOC calculation we use the average daily sales in terms of the purchasing price of the materials or even better – in terms of the TVC portion of the sale price.

DIOH is calculated by dividing the stock on hand by the average daily sales.

DIOH = Current Inventory ($) /Average Daily Sales ($)

DIOH for an individual stock item (SKU) – can be calculated as per the above definition or alternatively based on units of the specific SKU.