Considered the most economical order of quantity of inventory purchased the next problem is when a new order of purchasing the inventory is to be given it should be essential for the best inventory management this problem can be solved the determination of the reorder level of material reorder level of. Means such appropriate quantity of inventory in the store department on which. All levels the order of material purchase immediately show the quantity of material again reached up to the level of stores requirement of minimum level of store required, the following should be considered for computing the reorder level of material
- minimum stock level of safety stock :-minimum stock level means the minimum level of quantity of material stock which must be always remained and available in the store department or in the stock
- Procurement or Lead time of purchase:- lead time means the time gap between the order given for purchase of raw material and actual material received in the store department in other word lead time between the date order and the Order of actual material received in store
- daily usage of material or average daily consumption of material:- total annual requirement of material for production during the year is divided by the number of working days this is known as daily usage rate of material if the number of working days are not known for information related to working days is not available then number of working days can be self resume according to the nature of the work
formula for find out the reorder level:- it is calculated by the following manner
- when safety stock, daily usage rate and lead time is known then : reorder level = safety stock + (daily usage rate x Lead time in days)
- when maximum usage rate and maximum Lead time of material is known then : reorder level = maximum usage rate x maximum lead time
