Business – 4.2 Inventory management – Managing inventory | e-Consult
4.2 Inventory management – Managing inventory (1 questions)
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When lead time increases, the amount of stock required to cover the period before a new order arrives also increases. Consequently, both the buffer (safety) stock and the reorder level rise, because the firm must hold more inventory to avoid stock‑outs during the longer waiting period.
Conversely, a shorter lead time reduces the quantity needed to cover the gap, allowing the firm to hold less safety stock and a lower reorder level.
| Lead time (weeks) | Reorder level (units) |
| 2 | (80 × 2) + 40 = 200 |
| 4 | (80 × 4) + 40 = 360 |
The table illustrates that doubling the lead time from 2 to 4 weeks raises the reorder level from 200 units to 360 units, highlighting the direct impact of lead‑time changes on inventory requirements.