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lead time variability management

Inventory control systems and management
Keeping control of your stock so that you’re able to hold the least amount of inventory in your warehouses makes for easier organization, lower holding costs, better cash flow, and more space within your warehouses. When it comes to inventory control procedures, less is definitely more.

To do this, two formulas stand out:

Economic order quantity (EOQ)
EOQ is the optimum inventory you should purchase to minimize the costs of ordering and holding. You’ll need to know your annual fixed costs (D), demand in units (K), and carrying costs per unit (H).

EOQ Calc Formula

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Reorder point formula
Reorder point determines the right time to order more stock. Calculating this means adding together your lead time demand in days and safety stock in days:

reorder point formula
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To standardize the process across your inventory, try our free Reorder Point Calculator.

Download Reorder point calculator

Download Reorder point calculator
Once you have your optimal stock levels set, make sure that your inventory doesn’t go too low by keeping an eye on stock movements and tracking orders as they come and go.

Any inventory control system worth your time will combine EOQ and reorder points with low-stock alerts to send notifications automatically.