How do we define the inventory norms? What are all factors to be taken into consideration while defining the inventory norms?

YOU HAVE TO CONSIDER THE TOTAL CONSUMPTION OF LAST YEAR AND FROM THAT WHAT IS THE PEEK CONSUMPTION IN EACH AND EVERY MONTH  AND BASED ON THE YEARLY TARGET AND MONTHLY TARGET YOU HAVE TO FIX THE NORMS TO MAINTAIN INVENTORY NORMS

Dear Mr. Vaseem

if i got your question in a right way you meant the safety stock

Safety stock is calculated using the following formula:

Safety Stock = (Maximum  Usage − Average  Usage) × Lead Time

Lead time is the time which supplier takes in ordering the items

BC Ltd. is engaged in production of tires. It purchases rims from DEL Ltd. an external supplier. DEL Ltd. takes 10 days in manufacturing and delivering an order. ABC's requires 10,000 units of rims. Its ordering cost is $1,000 per order and its carrying costs are $3 per unit per year. The maximum usage per day could be 50 per day. Calculate economic order quantity, reorder level and safety stock.

Maximum daily usage is 50 units and average daily usage is 27.4 (10,000 annual demand ÷ 365 days)

Safety Stock = (50-27.4) × 10 = 226 units.

Reorder Level = Safety Stock + Average Daily Usage × Lead Time

Reorder Level = 226 units + 27.4 units × 10 = 500 units.