Danger level as the name suggest, is the point where normal issue of materials or inventories are stopped because the stocks/ materials has reached to a level where unnecessary release could cause disturbance in the production. When such case arises, materials are issued to the departments only when management gives proper approval regardless of the quota available to the departments. It is like an emergency situation where entity is facing severe shortage of materials.
It is the fault of the purchase officer if the stock falls in danger level because he is the person responsible for making materials available to be used in the production process. It means that he is not paying attention to the re-order level. Further investigation is needed as it might be the store keeper who has not informed the purchase officer for such dangerous level.
In the presence of ERP software, it has become very easy to avoid the danger level. However, there are some situations where things get out of control and no one can be made liable for the worst situation facing the entity.
It might possible that materials may not be available in the market. In this case, there is a strong need to make agreement with the suppliers to provide uninterrupted supply of materials in case the materials get short in the open market. Here the role of best supply chain management comes into play because proper supply of materials to make uninterrupted production of goods is necessary to gain profits and grow the business.
Formula
Danger level = Average consumption x Maximum lead time (re-order period) for emergency purchases
