1. What is Reorder Point?

The reorder point is the inventory level at which an order should be placed to replenish stock before it runs out. It considers both the demand during lead time and a safety buffer to account for variability.

2. How Does the Calculator Work?

The calculator uses the reorder point formula:

Where:

• \( \text{Demand} \) — Average daily demand (units)
• \( \text{Lead Time} \) — Time between placing order and receiving it (days)
• \( \text{Safety Stock} \) — Additional inventory to prevent stockouts (units)

Explanation: The formula ensures you order new stock when you have just enough inventory to cover demand during the lead time plus a safety buffer.

3. Importance of Reorder Point

Details: Calculating the reorder point helps maintain optimal inventory levels, preventing both stockouts (which can lose sales) and overstocking (which ties up capital).

4. Using the Calculator

Tips: Enter your average daily demand, typical lead time for replenishment, and desired safety stock level. All values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I determine my safety stock level?
A: Safety stock depends on demand variability and lead time variability. Higher variability requires more safety stock.

Q2: Should I use daily, weekly, or monthly demand?
A: Use the same time unit for both demand and lead time. Typically daily demand with lead time in days is most straightforward.

Q3: What if my lead time varies?
A: Use your maximum expected lead time or calculate a weighted average based on historical data.

Q4: How often should I recalculate my reorder point?
A: Recalculate whenever demand patterns change significantly or at least quarterly for stable demand.

Q5: Can this be used for perishable items?
A: For perishables, also consider shelf life and adjust safety stock accordingly to prevent spoilage.