1. What is the Reorder Point Formula?

The Reorder Point (ROP) is the inventory level at which an order should be placed to replenish stock before it runs out. It considers daily demand, lead time, and safety stock to prevent stockouts.

2. How Does the Calculator Work?

The calculator uses the Reorder Point equation:

Where:

• \( Daily\ Demand \) — Average units consumed per day
• \( Lead\ Time \) — Time between placing order and receiving it (days)
• \( Safety\ Stock \) — Buffer inventory to account for variability

Explanation: The formula calculates when to reorder by multiplying daily usage by lead time and adding a safety buffer.

3. Importance of Reorder Point Calculation

Details: Proper ROP calculation helps maintain optimal inventory levels, prevents stockouts, reduces carrying costs, and improves supply chain efficiency.

4. Using the Calculator

Tips: Enter daily demand in units/day, lead time in days, and safety stock in units. All values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is daily demand calculated?
A: Daily demand is typically calculated as average daily usage over a specific period (e.g., past 30-90 days).

Q2: What factors affect lead time?
A: Lead time depends on supplier reliability, shipping method, production time, and order processing time.

Q3: How to determine safety stock?
A: Safety stock is often based on demand variability and desired service level, typically calculated using statistical methods.

Q4: When should ROP be recalculated?
A: ROP should be reviewed regularly (e.g., quarterly) or when demand patterns, lead times, or business conditions change significantly.

Q5: What's the difference between ROP and EOQ?
A: ROP determines when to order, while Economic Order Quantity (EOQ) determines how much to order to minimize total inventory costs.