Stock control is best explained using a diagram, for example a bar gate stock graph:
- Maximum inventory level: the largest amount of items to be stored on site (500).
- Minimum inventory level: the lowest amount of items to be stored on site (100).
- Re-order quantity: the amount of stock ordered to restore inventory levels to their maximum point (400).
- Re-order level: the level of inventory at which new stock is ordered (300). 400 items are ordered and it takes two weeks lead time for ordered stock to arrive.
- Lead time is the amount of time taken between ordering stock and the stock being delivered.
- There is always a buffer inventory of 100 items held in case deliveries are held up or there is an unexpected large order.