What is Reorder point?
The reorder point is the inventory level at which a replenishment order should be triggered. It ensures stock arrives before a stockout. A dynamic reorder point reacts to forecast demand, lead time, and variability.
Formula
Reorder point = demand during lead time + safety stock
Practical example
At 50 units daily demand, 20 days lead time, and 200 units safety stock, the reorder point is 1,200 units.
What teams should remember
- The reorder point is the inventory level at which a replenishment order should be triggered.
- It ensures stock arrives before a stockout. A dynamic reorder point reacts to forecast demand, lead time, and variability.