Formulae

Question 1

What is the re-order level formula?

Answer 1

(maximum usage x maximum lead time) + buffer

Question 2

What is the economic order quantity formula?

Answer 2

EOQ = square root of (2 x cost of order x annual demand / holding cost)

Question 3

What is the maximum inventory level formula?

Answer 3

Re-order level + EOQ - (minimum usage x minimum lead time)

Question 4

What is the minimum inventory level formula?

Answer 4

Re-order level - (average usage x average lead time)