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One way of demonstrating how businesses manage their stock levels is to use a bar gate stock diagram like the one below.

The maximum stock level is the largest amount of stock a business can store on site. In the bar graph example, it is 500 items of stock.

The minimum stock level is also known as buffer stock. This is the lowest amount of stock a business can store on site while still being able to operate effectively. In the bar graph, the minimum stock level or buffer stock is 100 items. Buffer stock ensures a business can still operate for a short while if there are delays to deliveries or there is a large spike in demand. It also allows a business to replace any damaged stock while continuing to meet customer demand.

Lead time is how long it takes from ordering stock for it to arrive. The bar graph shows that the lead time is two weeks.

The reorder level is the point at which a business needs to order new stock in order for it to arrive before its stock falls below the minimum level. In the bar graph, the business would reorder stock when it has 300 remaining.

Many businesses now use computer software that automatically reorders stock when it reaches a pre-set reorder level. For example, stock levels can be automatically updated every time a product is sold to a customer, as products are scanned at the checkout using a barcode scanner. This not only ensures accurate stock levels but also allows stock to be automatically reordered when it reaches a pre-set level.