In every system of stock replenishment it is necessary to calculate the re-order quantity and the re-order date. There are numerous factors which may add to the difficulty of this calculation. Some of them will now be defined. In the short term there may be limitations in the form of money shortage or lack of space, or other resources. The re-order quantity (chosen by the customer) affects the buffer stock which the supplier must maintain. Nor would it be in the interests of the customer himself to calculate the re-order date and the re-order quantity independently, since both affect the costs of placing an order, stock keeping and stockout, or the avoidance of same. Again, much depends upon the re-order system employed, whilst the stock variation and associated costs also depend upon a variety of factors, so that it is necessary to formulate rules covering various circumstances. Last but by no means least, there is the question of the values to be substituted for the different factors in the formula.
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