Reorder Point

The reorder point is the moment when the level of inventory reaches a point in which a new order must be made to the supplier. Businesses calculate their reorder point by trying to predict the future sales of a particular item, the shipping time necessary, and the amount of safety stock required within their inventory. The level of inventory ideally never reaches zero due to finding the correct lead-time (the amount of time between the point of reordering to the point at which the items are inventory) and the amount of safety stock (items on reserve in the event of an unanticipated fluctuation of demand) available.

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