Stock Re-Order Levels

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Help!!!<BR><BR>I have just been going back over the calculations for re-order levels, maximum stock, minimum stock etc. when I noticed something odd:<BR><BR>In the Osborne (David Cox) book it gives the calculation for re-order level as:<BR> (maximum usage x maximum lead time) + minimum stock level<BR><BR>However in both the FTC and BPP books the calculation for re-order level is given as:<BR> maximum usage x maximum lead time<BR><BR>It is not a misprint in the Osborne book as one of the questions at the end of the chapter uses the formula given (ie adding the minimum stock level to max usage x max lead time).<BR><BR>Any suggestions on which one is right?<BR><BR>(Just for the record, I only have all 3 ECR books as I am struggling so badly and kept hoping it would make more sense in another book!)<BR><BR>Lynn

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Stock Re-Order Levels

    Hi Lynn.<BR><BR>I have re-order level as:- Maximum Usage x Maximum Lead Time.<BR><BR>The re-order level is the trigger point at which you should re-order.<BR><BR>Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Stock Re-Order Levels

    Lynn<BR>Don't panic<BR><BR>This is another discussion on this topic<BR> <a target=new class=ftalternatingbarlinklarge href="http://www.aat.co.uk/forums/messageview.cfm?catid=43&amp;threadid=5069&amp;highlight_key=y&amp;keyword1=Stock levels&quot;&gt;http://www.aat.co.uk/forums/messageview.cfm?catid=43&amp;threadid=5069&amp;highlight_key=y&amp;keyword1=Stock levels&lt;/a&gt;&lt;BR&gt;&lt;BR&gt;I teach ECR , and I do not think you should get too stressed about the formulae for stock control. The key is to understand the time to place a new order. If your supplier takes a maximum of 2 weeks and the most that you will need to issue in a given week is 120, then you shouldn't allow the stock level to fall below 240 before placing an order. If the nature of the business is that the delay between an order and receiving the goods is less certain or the profit that would be lost if you ran out of stock very high, then you'd want a buffer stock.<BR><BR>Think about where you work, and the sorts of things that have to be ordered. In the college where I work, photocopying paper is an example of something in huge usage and which can disrupt the business in a manner out of all proportion to its cost if we run out.<BR><BR>email me if you want to join one of my revision days for ECR<BR><BR><a target=new class=ftalternatingbarlinklarge href="mailto: sandy.hood@chichester.ac.uk ">sandy.hood@chichester.ac.uk</a><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Stock Re-Order Levels

    Hi Lynn,<BR><BR>I have just been doing a very similar question to the problem you have mentioned.<BR><BR>In essence both these formulas are correct - all you need to do is multiply the max. usage by max. lead time and this will be the correct answer UNLESS the question mentions a buffer - if so just add this to you calculation.<BR><BR>Hope this helps

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