Find out the Ordering Level from the following information:

Solution

The ordering level, also known as the reorder point, can be calculated based on the minimum stock level and the lead time for receipt of materials. The ordering level is the point at which a new order should be placed to replenish the stock before it reaches the minimum stock level. It ensures that there is sufficient stock available to meet demand during the lead time. The formula to calculate the ordering level is as follows: Ordering Level = (Daily Consumption * Lead Time) + Minimum Stock Given the information: Minimum Stock = 1000 units Maximum Stock = 2000 units Time required for receipt of material (Lead Time) = 15 days Daily consumption of materials = 50 units Ordering Level = (50 units * 15 days) + 1000 units Ordering Level = 750 units + 1000 units Ordering Level = 1750 units So, the ordering level is 1750 units. When the stock level reaches 1750 units, a new order should be placed to replenish the stock before it falls below the minimum level of 1000 units.