Reorder point
Also called: ROP · Minimum stock
The reorder point is the stock level at which you must buy again so the item does not run out before the supplier delivers.
The reorder point answers a simple question: at what stock level should I place the next order? Order too early and material sits idle; order too late and production stops waiting for the supplier.
How it works
The basic formula is average daily usage × supplier lead time + safety stock. Safety stock covers demand variation and late deliveries. When the ERP compares the balance with the reorder point every day, replenishment becomes routine: the system alerts, or requests quotes from approved suppliers, builds the comparison and only asks the buyer to approve.
Practical example
A machine shop uses an average of 12 bars of 1045 steel ⌀50 a week (about 2.4 per working day). The supplier delivers in 6 working days and safety stock is 8 bars. Reorder point = 2.4 × 6 + 8 ≈ 22 bars. When the balance drops to 22, the quote request goes out on its own.
Common mistakes
- Using the same minimum stock for items with very different usage and lead times.
- Not updating lead time when the supplier changes.
- Counting material reserved for orders as if it were free.
FAQ
What is the difference between reorder point and safety stock?
Safety stock is the buffer for surprises; the reorder point is the purchase trigger, which includes usage during lead time plus that buffer.
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