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hiral

hiral (Querist)
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11 August 2014 can anyone explain me the meaning of re-order level ? I am a bit confuse.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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11 August 2014 Re-order level is a level of material at which the storekeeper should initiate the purchase requisition for fresh supplies. When the stock-in-hand comes down to the re-ordering level, it is an indication that an action should be taken for replenishment or purchase.

The re-order level is calculated as follows:

Re-order Level= Minimum Level(Safety stock) +(Average lead time x Average consumption)
OR
Re-order Level= Maximum Consumption x Maximum Re-ordering Period

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