OUTL or "Order Up-to Level" is a number that is used by the replenishment applications to determine how much of a product should be ordered when the inventory falls below a pre-decided level. OUTL defines the target level of the inventory that a replenishment order must bring it up-to. Since the objective here is to bring up the inventory to a pre-determined OUTL level, the actual order quantity varies for each ordering cycle, since it depends on the difference between the actual stock on the day of ordering and OUTL.
Alternately, you can use a "fixed order quantity" to replenish stocks. In this case, while the order quantity remains fixed, the resulting inventory level after the replenishment will vary depending on the actual stock on the day of ordering.
What process helps determine these two variables? If you have an established inventory planning (IP) process, then it will be one of the outputs of this process. How does this process work? Read more about replenishment and inventory processes here. You can also download a copy of the article on replenishment & inventory planning here.
Want to know more about supply chain processes? How they work and what they afford? Check out my book on Enterprise Supply Chain Management at Amazon. You will find every supply chain function described in simple language that makes sense, as well as see its relationship to other functions.
© Vivek Sehgal, 2009, All Rights Reserved.