How-to
Inventory control for small factories: reorder levels, safety stock and EOQ
IndustryX Suite Team 1 min read
Why inventory control matters
Too little stock stops production and delays orders. Too much locks up cash and space. Good control keeps you between the two.
1. Set a reorder level
The reorder level is the quantity at which you place a new order. A simple rule: average daily use multiplied by the supplier's lead time in days, plus a margin.
2. Hold safety stock
Safety stock is a buffer for late deliveries and demand spikes. Set it higher for items that are critical or have long or unreliable lead times.
3. Choose the order quantity
Economic order quantity balances ordering cost against holding cost. Use it as a guide, then adjust for supplier minimums and storage space.
4. Choose a valuation method
Methods such as FIFO and weighted average cost value your stock differently. Pick one and use it consistently.
5. Count regularly
Count high-value and fast-moving items more often and correct differences with a stock adjustment that carries a reason.
A simple routine
- Review items below reorder level weekly.
- Raise purchase orders for the shortfall.
- Count a few items every week.
- Look at slow-moving stock monthly.