What is a benefit of setting reordering levels?

Setting reordering levels is a critical inventory management practice that helps businesses optimize their stock levels. The primary benefit of establishing these levels is that it prevents overstocking, ensuring that the organization maintains an efficient quantity of inventory without excess.

When a reordering level is set, it acts as a trigger for ordering new stock just before the existing inventory runs out. This practice helps maintain a balance between having enough products to meet customer demand while also avoiding the costs associated with holding surplus inventory. Overstocking can lead to increased storage costs, potential obsolescence of products, and wasted resources, which can negatively impact the overall efficiently running of the business.

The other options present scenarios that do not align with the objectives of effective inventory management. Increased labor costs, extended lead times, and reduced flexibility suggest inefficiencies or challenges that businesses would typically aim to avoid through strategic ordering and inventory control.