Multiple Stock — Inventory Control Basics | multiplestock.com
Two formulas with their units, worked from weekly demand through to an order size you can place.
The reorder point answers when to order: average daily demand multiplied by supplier lead time in days, plus safety stock for variability. Start from weekly demand: if an item sells 14 units per week, average daily demand is 14 / 7 = 2 units per day. If the supplier lead time is 5 days, the lead-time demand is 2 x 5 = 10 units.
Safety stock covers variability: more variability in demand or in supplier lead time requires more safety stock for the same service level. With a steady item, 6 units of safety stock may be enough; with a volatile one, the same service level needs more. Track actual lead times for a few weeks before fixing the number, because a single average hides the late deliveries that cause stockouts. The reorder point for this item is then 10 + 6 = 16 units.
On narrow screens, swipe or scroll the plate sideways.
The EOQ answers how much to order: Q = sqrt(2 x D x S / H). D is annual demand in units, so 14 units per week x 52 weeks = 728 units per year. S is the fixed cost of placing one order; enter the staff time and paperwork cost of one order in the same money unit as H. H is the annual cost of holding one unit, including storage and the cost of capital tied up.
Worked numeric example: with D = 728 units per year, S = 12 per order and H = 3 per unit per year, Q = sqrt(2 x 728 x 12 / 3) = sqrt(5824) ≈ 76 units per order. That is about 728 / 76 ≈ 10 orders per year, roughly one every 5 weeks.
Recompute the EOQ whenever D, S or H shifts materially: a rent change moves H, a new ordering system moves S, a seasonal peak moves D. The reorder point and the EOQ are independent: one sets the trigger, the other sets the batch size.
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