What is a Reorder Level?

Definition: The reorder level is an inventory indicator in materials management and logistics that triggers restocking of goods or materials. When the stock level of an item reaches or falls below the reorder level, an order is placed to replenish inventory in time and prevent shortages.

Calculation of the Reorder Level

The reorder level can be calculated using the following formula:

Reorder Level = Average Daily Usage × Lead Time + Safety Stock

• Average Daily Usage: How much of a specific item is used per day.
• Lead Time: The time required for a new shipment to arrive at the warehouse.
• Safety Stock: An additional buffer to account for unexpected fluctuations in usage or lead time.

What are the Benefits of the Reorder Level?

• Ensuring Material Availability: It helps ensure sufficient materials are available to maintain production processes or delivery commitments.
• Preventing Shortages: It minimizes the risk of running out of goods or raw materials.
• Optimizing Inventory: A clear restocking strategy leads to more efficient inventory management.

Conclusion

In summary, the reorder level is a crucial control parameter in inventory management, helping companies ensure smooth operations in logistics and production.