Inventory Management Systems

Question 1

Maximum stock level:

Answer 1

This is the most amount of inventory that can be held which will prevent overstocking

Question 2

Minimum stock level:

Answer 2

This is the least amount of inventory that can be held which will prevent understocking

Question 3

Re-order level:

Answer 3

This is when stock is re-ordered using EPOS and automaticlly re-ordering goods which prevents stock running out

Question 4

Re-order quantity:

Answer 4

This is the amount that is ordered

Question 5

Lead time:

Answer 5

This is the time between a new order being placed and the stock arriving

A shorter lead timeallows the business the rush orders

Question 6

Buffer inventory:

Answer 6

This is the extra inventory below the minimum to be used in emergencies so production doesn’t stop

Question 7

What are factors affecting inventory levels?

Answer 7

• Maximum stock level depends on storage, cost and demand
• Minimum stock levels depend on wastage, finance available and demand
• The re-order level depends on the lead time, stock being held and bulk buying discounts