Order up to level is when stock levels are periodically reviewed and an amount of the item is ordered to return stock levels to the target level.
If the inventory level is at or below the reorder point, then the order-up-to-level is initiated. In inventory control, periodic stock taking and review will help in maintaining the order up to level.
The Order up to level formula
The most simple way of calculating it is,
Order-up-to-level quantity = Target level – reorder point.
There are two variations we can find in computing reorder points.
- Reorder Point = Safety Stock + Basic Stock + (Lead Time in days* Unit Sales Per Day ) // If the company maintains safety stock and basic stocks
- Reorder Point = Lead Time in days* Unit Sales Per Day ) // If the company doesn’t maintain safety stock and basic stocks
Hence our computation could be,
- Order up to level quantity = Target level – (Safety Stock + Basic Stock +(Lead Time in days* Unit Sales Per Day )).
- Order up to level quantity = Target level – (Lead Time in days* Unit Sales Per Day ).
Supply chain management systems available in the market today are with sophisticated inventory management modules.
Most of the ERP solutions available are having an SCM module that can manage inventory control. The Thing that needs to be taken care of is the periodic review system is in place.