Inventory Control Charts | 60 Second Business

An inventory control chart is a tool for managing stock levels, making sure a business has enough to meet demand, but not so much it ties up cash.
The chart plots stock levels over time. Three lines define the management discipline.
Maximum stock level, the most stock the business is prepared to hold. Set by storage capacity and the cost of capital tied up in inventory.
Minimum stock level, the buffer below which stock should never fall, also called safety stock. It protects against unexpected demand spikes and supplier delays.
Reorder level, the trigger point at which a new order is placed. It's set high enough above the minimum that stock doesn't run out before the new order arrives.
The chart also shows lead time, the gap between placing and receiving an order, and reorder quantity, how much is ordered each time.
Stock falls steadily as it's used, then jumps when a new delivery arrives. Done well, the saw-tooth pattern stays between maximum and minimum.
Modern alternatives include just-in-time, where stock is delivered only when needed, removing buffer entirely.
For any business, inventory control is the balance between availability and cost, and the chart is the discipline that keeps both in check.

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