In this video I will discuss meanings of Reordering Level, Minimum Stock Level, and Maximum Stock Level and Danger Level
1. *Reordering Level (ROL):*
- Meaning: The inventory level at which a new order should be initiated to restock items. It is determined by considering the product's demand rate, lead time, and safety stock. Reordering at this level helps prevent stockouts during the time it takes to replenish supplies.
2. *Minimum Stock Level (Min Level):*
- Meaning: The minimum quantity of inventory that should be maintained at all times. Falling below this level could disrupt operations. It includes safety stock to account for variations in demand and supply, ensuring a buffer against unforeseen circumstances.
3. *Maximum Stock Level (Max Level):*
- Meaning: The upper limit of inventory that a business aims to hold. This level considers storage capacity, carrying costs, and the desire to avoid excessive holding of goods. It prevents overstocking, which can lead to increased holding costs and potential obsolescence.
In summary, these levels collectively guide inventory management, helping businesses balance the need for product availability with the goal of minimizing holding costs and optimizing operational efficiency.
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