How to get maximum stock level

We have covered maximum stock level in great detail in our previous post. As we know, in order to get maximum stock level, we need three things, namely:

Re-ordering stock level – it is set by the management by analysing the pattern in the past and availability of the goods in the market. Only by using past pattern, one cannot set correct re-ordering stocl level as the specific raw material might be in short supply in the market.

Economic order quantity – EOQ can be calculated using the formula given in our previous post about EOQ.

minimum consumption – to be on safe side, management uses minimum consumption in the calculation. This is a conservative approach and same has been included in the maximum stock formula.

minimum duration required for re-order – like minimum consumption, management uses minimum duration to get maximum stock point. The idea behind using conservative approcach is to avoid any time delay in the production and produce goods timely.