Basestock

Basestock, or base stock level, is an inventory management concept used to define the target level of on-hand stock for each item in a system. In a basestock policy, each item has a base stock level S. The inventory position is monitored continuously; whenever the stock position falls below S, an order is placed to raise the position back to S. In effect, the order quantity equals S minus the current inventory position (or zero if already at or above S).

Basestock is also known as an order-up-to policy because orders bring the inventory up to the base stock level. The policy is particularly suitable for environments with relatively constant lead times and uncertain demand, and it is widely used in manufacturing, distribution, and retail settings.

Choosing S involves balancing holding costs against stockout costs and service level targets, and it often reflects the expected demand during lead time plus safety stock. In basic terms, S is often described as the sum of expected lead-time demand and safety stock, though precise calculation may use probabilistic demand models and service level constraints.

Basestock policies are contrasted with other replenishment rules such as (s, Q) policies, where orders are triggered when inventory drops to a reorder point s and stocked in fixed quantities Q. Base stock policies are common in Kanban systems and continuous review inventory control, and they can be extended to multiple items with independent demand.

Limitations include reliance on accurate demand and lead-time estimates; for items with rapid obsolescence or highly variable, correlated demand, alternative policies may be preferable. Modern applications often integrate base stock decisions with optimization tools and ERP systems.