UNDERSTAND THE CONCEPT
A reorder point signals when replenishment should begin. A simple starting model is expected demand during replenishment lead time plus safety stock. Lead time should cover the actual interval until stock is usable, including internal approval, supplier processing, transport and receiving checks. Use consistent time units: weekly consumption multiplied by lead time in weeks gives the expected quantity consumed while replenishment is under way.
The trigger must use a defined stock position. Systems may include open orders, reservations, transfers and unusable balances differently, so verify the configuration before relying on automatic proposals. The reorder point is distinct from the quantity to buy; pack sizes, minimum quantities and target stock levels influence that decision. Review the inputs after recurring shortages, supplier changes or demand shifts. A formula based on stale lead times can produce orderly purchasing while still failing maintenance.
Questions to take back to your team
- Does lead time end at usable receipt rather than dispatch?
- Which reservations and open orders enter the stock position?
- When were consumption and lead-time assumptions last reviewed?
Further reading
Explore the primary references below. Requirements and applicability depend on your organization and jurisdiction.
