Last updated August 24, 2023
What is an inventory level?
An inventory level refers to the quantity of goods, products, or materials that a business currently has on hand in its . It represents the actual amount of inventory available at a specific point in time. Inventory levels are a critical aspect of inventory management as they directly impact a business’s ability to meet customer demand, manage production, and avoid or overstocking.
How to measure inventory level?
Inventory levels are typically measured using units of measurements such as pieces, units, cases, or any other relevant measurement unit based on the nature of the inventory items. There are three main types of inventory levels:
- Minimum inventory level (): This is the minimum quantity of inventory a business aims to maintain to prevent stockouts due to unexpected fluctuations in demand or supply disruptions. It acts as a buffer to ensure that there’s enough inventory available even during unforeseen circumstances.
- Maximum inventory level (): This is the point at which an order for additional inventory is triggered. When the actual inventory level drops to this point, it’s time to stock to avoid stockouts.
How do you set your inventory level?
Setting inventory levels involves a strategic approach that takes into consideration various factors such as demand patterns, , costs, and desired . The goal is to find the right balance between having enough inventory to meet customer demand while avoiding excessive carrying costs.