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Reorder level

The reorder level is the inventory position at which replenishment should be initiated. With certain demand and lead time, it equals demand during lead time; a separately required buffer can be added. Some traditional control questions specify maximum usage multiplied by maximum lead time as a protective convention. Apply the stated assumptions rather than mixing formulas from different systems. The reorder level determines timing, not the economic quantity ordered.

Worked example

Usage is 40 units daily and lead time five days, with a 100-unit buffer. Reorder level is 40 × 5 + 100 = 300 units.

Common mistake

Do not wait until stock reaches zero when replacement has a lead time, or use EOQ as the reorder point without justification.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA MA Direct September 2026–June 2027
FIA FMA Direct September 2026–June 2027