ECONOMICS

Detailed explanation-1: -The effects of too little inventory This happens when you cannot immediately fulfill an order because of a stock-out of the ordered item. Not keeping track of inventory levels can lead to stock out of popular items during a sudden surge in demand. This can happen due to peak season or other external factors.

Detailed explanation-2: -Reorder level is the stock level of a specific product and reorder quantity is the number of units to be ordered while placing a new purchase order. Calculating inventory reorder points helps with the reduction in inventory Cost, reduces stockouts, and improves forecasting.

Detailed explanation-3: -High Freight costs for incoming and outgoing shipments because inventory levels were too low. Higher prices for parts and materials because a company is not using its economies of scale. Higher per unit freight cost for parts and materials because shipments are too infrequent.

Detailed explanation-4: -The reorder point varies from product to product and is primarily influenced by two critical factors-daily sales velocity and lead time.