The stock level at which a new order should be placed to prevent production problems due to stockouts is known as?

• A. JIT
• B. EPOS
• C. Maximum stock level
• D. Reorder level

Answer: (D)

Reorder level is the stock level that triggers placing a new order to prevent running out during production. It represents enough stock to cover demand during lead time plus any safety stock to handle variability. For example, if a firm uses 40 units per day and delivery from suppliers takes 7 days, the basic reorder level would be 280 units; adding safety stock might raise that trigger point to a higher number to guard against delays or spikes in demand. When inventory falls to this level, a replenishment order is made so new stock arrives just in time to prevent a production stoppage.

Other terms describe different ideas: JIT aims to minimize inventory by receiving goods only as needed, EPOS is a system for tracking sales to update stock levels, and a maximum stock level sets an upper limit to avoid overstocking. None of these define the exact point at which to reorder to prevent stockouts—the reorder level does.