What is reorder point?

What is reorder point?

• A. Inventory level at which a new order should be placed.
• B. The minimum stock level kept in safety stock.
• C. The maximum inventory level allowed.
• D. The date when orders are confirmed.

Answer: (A)

Reorder point is the inventory level at which a new order should be placed. It triggers replenishment so you don’t run out, taking into account how long it takes to receive an order (lead time) and the need for some safety stock to cover variability in demand or supply. In simple terms, you set the reorder point to cover expected demand during lead time plus any extra stock you want to guard against unexpected spikes. When on-hand stock falls to that level, you place the next order to maintain service levels while avoiding unnecessary excess. This matches the description of when to place a new order based on current inventory. The minimum stock level kept as safety stock is a separate buffer, not the trigger for ordering. The maximum inventory level is a cap on total stock, not the reorder trigger. The date orders are confirmed relates to processing rather than the stock level that determines when to reorder.

Reorder point is the inventory level at which a new order should be placed. It triggers replenishment so you don’t run out, taking into account how long it takes to receive an order (lead time) and the need for some safety stock to cover variability in demand or supply. In simple terms, you set the reorder point to cover expected demand during lead time plus any extra stock you want to guard against unexpected spikes. When on-hand stock falls to that level, you place the next order to maintain service levels while avoiding unnecessary excess.

This matches the description of when to place a new order based on current inventory. The minimum stock level kept as safety stock is a separate buffer, not the trigger for ordering. The maximum inventory level is a cap on total stock, not the reorder trigger. The date orders are confirmed relates to processing rather than the stock level that determines when to reorder.