What is the Difference Between Reorder Level and Reorder Quantity?
🆚 Go to Comparative Table 🆚The difference between reorder level and reorder quantity lies in their purpose and calculation in inventory management:
- Reorder Level: This is the stock level of a specific product at which a new order for additional stock is placed. Reorder level is typically determined based on factors such as lead time, demand variability, and desired service level. The main goal of reorder level is to ensure that stock is available when needed and to prevent stockouts or disruptions in the supply chain.
- Reorder Quantity: This refers to the number of units to be ordered while placing a new purchase order. Reorder quantity is determined based on factors such as demand forecast, economic order quantity (EOQ), storage capacity, and more. The main goal of reorder quantity is to optimize inventory management by determining the right quantity to order, balancing the costs of ordering and holding inventory.
In summary, reorder level is the trigger for placing a new order, while reorder quantity determines the size of the order. These two concepts work together to ensure smooth and efficient inventory management.
On this pageWhat is the Difference Between Reorder Level and Reorder Quantity? Comparative Table: Reorder Level vs Reorder Quantity
Comparative Table: Reorder Level vs Reorder Quantity
Here is a table highlighting the differences between Reorder Level and Reorder Quantity:
| Feature | Reorder Level | Reorder Quantity |
|---|---|---|
| Definition | Reorder Level is the inventory level at which a purchase requisition is generated for a fresh supply of material. | Reorder Quantity refers to the size of the material lot for which an order is placed with the chosen supplier. |
| Main Element | Time | Quantity/Number of Units |
| Purpose | Helps in ascertaining when to buy or place the order for the material lot. | Facilitates in determining how much quantity of materials to be purchased by the firm. |
| Factors Considered | Maximum consumption during lead time, lead time taken by the supplier, safety level, replenishment period. | Average daily usage, average lead time, cost per order, carrying cost per unit. |
| Formula | Re-order Level = Maximum Consumption × Maximum Reorder Period (or) Re-order Level = Minimum Stock Level + (Average Rate of Consumption × Average Reorder Period). | Reorder Quantity = √(2 × Quantity Required × Cost per Order / Carrying Cost per Unit). |
Reorder Level acts as a trigger or indication for placing the order for an item, while Reorder Quantity is the actual act of calculating the number of units to be ordered in a new purchase order for the item.
Read more:
- Quantity vs Unit
- Inventory vs Stock
- Inventory Control vs Inventory Management
- Scalar Quantity vs Vector Quantity
- Unit Price vs Unit Cost
- FIFO vs LIFO
- Invoice vs Purchase Order
- Logistics vs Supply Chain Management
- Supply Chain Management vs Operations Management
- Contract vs Purchase Order
- Job Order Costing vs Process Costing
- Stocktaking vs Stock Control
- Stack vs Queue
- Retail vs Wholesale
- Supply Chain vs Value Chain
- Quality vs Value
- LoD vs LoQ
- TQM vs TQC
- Market Price vs Equilibrium Price