Page 43 - F2 Slides 2017-18
P. 43
Re-order levels
The pre-determined level of inventory when reached an
order is placed, to avoid stock-outs.
Re-order level = usage per day × lead time in days
When lead time and demand in lead time is not constant :
Re-order level = maximum usage × maximum lead time
Maximum Inventory level = Re-order level + re-order quantity –
(minimum usage × minimum lead time)
Minimum Inventory level (buffer inventory) = Re-order level –
(average usage × average lead time)
Average inventory = (Re-order quantity / 2) + minimum inventory
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