INVENTORY LEVELS

Reorder Level: This is the level of Raw material at which a fresh order for Raw material purchases shall be made. This gives the answer to the questions - "When to purchase?", "When the new purchase shall be made?"

Reorder quantity: This gives the quantity to be purchased at a time. This gives the answer to the question - "How much to purchase?"

Maximum Level: It is the level of stock beyond which inventory should not cross.

Minimum Level: It is the level of stock beyond which the inventory will not be allowed to fall.

Reorder Level (or) Reorder point	Lead time consumption + Safety stock (or) Maximum Usage X Maximum delivery period/lead time
Reorder quantity	EOQ
Maximum Level	Reorder Level + Reorder quantity - (Minimum usage X Minimum lead time) (Or) EOQ + safety Stock
Minimum Level	Reorder level - (Normal consumption X Normal Lead time) Or Safety Stock
Average Level	Min + Max/ 2 (Or) Min Level + 1/2 ROQ
Danger Level	Emergency delivery period X Average usage / Minimum usage

Note:

a)    Both usage and time must be taken for the same period of time.

b)    In the absence of information relating to normal consumption & normal lead time, use the average levels.