The Reorder Point (ROP) is a critical inventory management metric that defines the inventory level at which a new order should be placed to replenish stock before it runs out. The ROP is calculated based on factors such as average demand during lead time, lead time variability, and safety stock. By setting accurate reorder points, companies can avoid stockouts and maintain service levels without holding excessive inventory.Properly managing the reorder point requires continuous monitoring of demand patterns and supplier lead times. If these factors change due to seasonality, supplier delays, or market trends, the reorder point must be adjusted accordingly. Integrating ROP calculations into automated inventory systems helps trigger timely purchase orders, thereby optimizing inventory turnover and reducing holding costs.
