ECONOMICS

Detailed explanation-1: -Reorder Quantity = ADU x ALT. Once you multiply ADU and ALT, you’ll know the amount of inventory you need to reorder. Let’s look at an example of how to calculate reorder quantity for an individual product: ADU = 10 units.

Detailed explanation-2: -Reorder quantity, also known as the reorder point, is the quantity of an order to be placed for purchasing a specific item that needs to be restocked. It is based on the supplier’s average replenishment period, the item’s maximum usage during the replenishment interval and the need for safety stock.

Detailed explanation-3: -The average time taken by the supplier to deliver the order to the factory’s stores is the average reorder period.

Detailed explanation-4: -The key difference between reorder level and reorder quantity is that reorder level is the inventory level at which a company would place a new order for a stock of raw materials for production whereas reorder quantity is the number of units that should be included in the new order.

Detailed explanation-5: -The EOQ reorder point is a contraction of the term economic order quantity reorder point. It is a formula used to derive that number of units of inventory to order that represents the lowest possible total cost to the ordering entity.