Amount of stock you will use between placing and receiving an order (A) = Average monthly consumption multiplied by the number of months between placing an order and its receipt (lead time).
Safety stock (B) = An estimate of the amount of stock you will need in reserve to prevent stockouts. In a standard Min-Max system with periodic review, the safety stock must be at least equivalent to the stock of one review period. In most cases, the safety stock should be larger than the stock of one review period to allow for increased demand or unexpected delays.
Minimum Stock Level (C) = Amount of stock you will use between placing and receiving an order (A) (reorder level) + Safety stock (B)
Amount of stock you will use between orders (D) = Average monthly consumption multiplied by the number of months between orders (reorder interval).
Maximum Stock Level = Minimum stock level (C) + Amount of stock you will use between orders (D).