They should set a maximum (economic) stock level as this will ensure that they can continue production without any interruption but minimise storage costs etc. for the business. - t he ideal amount of stock to hold
They should set a minimum stock level as this will ensure that production is not disrupted by shortages as it takes into account how long is required for ordering and delivery times.
They should set a re-order level and when this point is reached, new stock should be ordered. This will ensure that the organisation doesn’t run out.
They should also set a reorder quantity which will ensure that when the re-order level is reached, the quantity requested will take the stock level back to the maximum (economic) stock level.