Reorder Point
Definition
The inventory level that triggers a replenishment order. It equals expected demand during supplier lead time plus safety stock.
In Practice
The reorder point (ROP) answers a simple question: when stock falls to what level should I place the next order so the replenishment arrives just before I run out? The base calculation is average daily demand multiplied by lead time in days, plus safety stock to absorb variability.
In day-to-day planning, ROPs are usually maintained in the ERP or planning system and reviewed when demand rates or lead times change. A stale reorder point is one of the most common causes of avoidable stockouts, because the trigger fires too late for the new demand reality.
Example: a warehouse ships 40 units per day of a part with a 7-day lead time and holds 100 units of safety stock. The reorder point is 40 x 7 + 100 = 380 units. When on-hand plus on-order inventory drops to 380, the buyer releases a new purchase order.
Related Calculators
Related Terms
Extra inventory held beyond expected demand to protect against variability in demand or supply. It acts as a buffer that keeps orders flowing when forecasts miss or deliveries run late.
Reorder QuantityThe number of units ordered when a replenishment is triggered. It may be a fixed lot size such as the EOQ, or a variable amount calculated to reach a target stock level.
Continuous ReviewAn inventory policy where stock is monitored constantly and a fixed quantity is ordered whenever inventory falls to the reorder point. Order quantity is fixed while order timing varies with demand.
Inventory PositionThe total stock available to meet future demand, calculated as on-hand inventory plus on-order inventory minus backorders and committed allocations. It is the number replenishment decisions should be based on.