What is base stock policy

The base-stock policy is a special case of the well-known inventory control policy which operates on a single item as follows: Place an inventory replenishment order to raise the inventory position (stock on hand on order - back ordered) to a level S whenever the inventory position drops to or below the reorder point s ...

What does base stock mean?

What is Base Stock? Base stock is the amount of inventory that a business needs to keep on hand in order to fulfill customer orders with a delay no greater than expected by customers. If inventory levels drop below the base stock level, reordering delays will likely result in the loss of customers.

How do you calculate base stock?

Inventory position = On-order inventory + Inventory level. – the maximum inventory position we allow. – sometimes called the base stock level.

What is base inventory level?

Base inventory level is made up of aggregate lot-size inventory plus the aggregate safety stock inventory. It does not take into account the anticipation inventory that will result from the production plan. The base inventory level should be known before the production plan is made.

What is safety stock level?

Safety stock is a term used by logisticians to describe a level of extra stock that is maintained to mitigate risk of stockouts (shortfall in raw material or packaging) caused by uncertainties in supply and demand. Adequate safety stock levels permit business operations to proceed according to their plans.