What is the meaning of Re-Order Level?
Re-Order Level (ROL) is the point at which new supplies are ordered. It usually occurs when the inventory level reaches some predetermined point, known as reorder point so that fresh supply can be received in time without any delay.
Reorder Point denotes the stock level at which a particular material will be considered to be exhausted and necessitate its replacement. ROL is also used to determine the optimal size of a purchase order.
What is the meaning of Re-Order Quantity?
Re-Order Quantity (ROQ) is the maximum number of units to be ordered when the stock on hand falls below a given reorder level. It can also be defined as the quantity of items in an inventory that will allow zero safety stock, i.e., no safety stock is needed between ordering points.
ROL vs ROQ: What’s the main difference?
The main difference between ROL and ROQ is that the first one denotes the point at which new supplies are ordered while the second one defines a quantity of items in an inventory that will allow zero safety stock between ordering points. The terms ROL and ROQ can be used interchangeably as long as they carry this meaning.
Other major differences between Re-order Level and Re-order Quantity include –
- Re-order Level is a fixed value while Re-order Quantity can be changed according to the needs of an organization.
- ROL definition includes the reference point from which reordering takes place while ROQ does not consider this factor.
- While Re-Order Level is used for all items, Re-Order Quantity is used to determine the optimal size of a purchase order.
- ROL is also known as reorder point while ROQ can be called reorder quantity or reorder level depending on the situation.
- ROL is often used in conjunction with EOQ (Economic Order Quantity) to determine the optimal purchase quantity and the best time at which it should be ordered.
- ROL is calculated based on safety stock while ROQ can be determined without taking into account any safety stock.
- ROL is calculated by dividing the number of units on hand with the reorder point while ROQ formula does not consider this factor.
These are some of the main differences between ROL and ROQ. It’s important to note that ROL denotes the point at which new supplies are ordered, while ROQ addresses the maximum number of units to be ordered when stock on hand falls below a given reorder level.