Minimum Stock Level:

Minimum Stock Level = Re-ordering Level – (Normal Consumption x Normal Re-order Period)

Maximum Stock Level:

Maximum Stock Level = Reordering Level + Re-ordering Quantity - (Minimum Consumption x
Minimum Re-ordering Period)

Danger Level:

Danger Level = Average consumption (or) Normal Consumption X Maximum Reorder Period
for Emergency Purchases

Average Stock Level

Minimum Stock Level+Maximum Stock Level

Average Stock Level = 2

Reorder Level:
Reorder Level =Maximum Consumption X Maximum Reorder Period

Normal Usage:
Total Consumption per year
Normal Usage= 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑀𝑜𝑛𝑡ℎ𝑠 𝑖𝑛 𝑎 𝑌𝑒𝑎𝑟

EOQ (Economic Order Quantity):

2𝐴𝑂
𝐸𝑂𝑄 = √
𝐶

Where
A= Annual Usage
O= Ordering Cost
C= Carrying Cost or Storage Cost
Inventory Turnover Ratio:
Inventory Turnover Ratio = Cost of Material Consumed / Average Inventory
Average Inventory= (Opening Stock + Closing Stock)/2