What are the main differences between the Reorder Level and Reorder Quantity?
The reorder level is the level of the stock of a particular item, held by the business when an order is needed to be placed for avoiding the risk of being out of stock. It is based on the average time taken by the supplier for replenishment, maximum usage of the item during the replenishment time, and safety stock requirement. It is also known as the reorder point.
The reorder quantity: is the quantity of the order that is to be placed on a new purchase order for the particular item. The ordered quantity or the number of units needs to be optimum taking into account the various factors like cost of the order, cost of transportation, carrying costs, etc. The reorder quantity is the quantity that, given the normal usage, provides the best balance between the various factors like quantity discounts, freight, storage costs, and working capital requirements.
Take the example of Big Brand Like Oppo Plant in Greater Noid where every second count and one mobile is manufactured every three seconds, now to do this kind of planning, there are various important thing to be considered