CPIM Practice Exam

What does the term 'reorder quantity' refer to in inventory systems?

1. The quantity that should always be stocked

2. A variable amount ordered that changes with demand

3. A fixed quantity ordered each time stock is low

4. The minimum quantity to maintain

The correct answer is: A fixed quantity ordered each time stock is low

The term 'reorder quantity' refers specifically to a fixed quantity that is ordered each time the inventory level falls below a predetermined threshold. This approach helps ensure that stock is replenished systematically, minimizing stockouts (situations where the inventory is depleted) while keeping ordering processes efficient. Reorder quantity strategies are commonly used in inventory management to streamline ordering practices. By determining a fixed reorder quantity, businesses can maintain consistency in their purchasing efforts, making it easier to manage supplier relationships and inventory levels. This strategy contrasts with other methods that may involve varying order amounts based on fluctuating demand. For instance, setting a minimum quantity to maintain addresses safety stock levels rather than the quantity to reorder. Additionally, the notion of always stocking a certain amount and changing order amounts with demand do not align with the specific definition of reorder quantity, which centers on the fixed metric utilized when stock needs replenishing.