Maximum stock level

The maximum stock level is a not-to-exceed amount used for inventory planning. This stock level is based on a calculation of the cost of storage, standard order quantities, and the risk of inventory becoming obsolete or spoiling with the passage of time. Another issue may be a strict limitation on storage space, as may be the case for refrigerated or frozen goods.

The maximum stock level tends to be quite high for low-volume, low-cost items that are unlikely to become obsolete, such as fittings and fasteners. Conversely, the maximum stock level tends to be quite low for high-volume or high-cost items, and especially those with short shelf lives. Thus, the maximum stocking level might only be enough for a few days or weeks for fashion clothes (short shelf life), computer chips (high cost), and refrigerators (high volume).

Related Courses

Inventory Management