What is Re-order level

Kumar Gaurav (Going...to be C.A soon...) (1624 Points)

06 August 2010

Dear all

I knw d formula of Re-order level that is

Max. usage*Max. lead time consumption=Re-order level

but in practically how re-order level will work?

suppose i have to set re-order level for an item ABC

Max. usage is for the item is 500 KG per week

Max. lead time conumpstion is 5 days then what would be answer??

Pl. clarify!

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3 Replies

Suman (CA FINAL) (214 Points)
Replied 06 August 2010

Hi Kumar Gaurav,

Re-order level is the level at which the new order for supply of materrials to be placed.

In the eg u had given Reorder level is 12500Kg(500*5). When ur stock level reaches 12500units u need to place the next order to avoid shortage.

Hope ur query is answered.

1 Like

Kumar Gaurav (Going...to be C.A soon...) (1624 Points)
Replied 06 August 2010

Thanks Dear!

I got it.

Suman (CA FINAL) (214 Points)
Replied 06 August 2010

Welcome Kumar Gaurav and Shalini :-)

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