Materials
Reorder Point Formula (ROP Formula)
A calculation to determine the inventory level at which a new order should be placed.
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Updated 2025-10-01
Definition
The ROP formula ensures businesses reorder stock before it runs out, preventing stockouts and lost sales.
Overview
Overview
The formula considers lead time, demand, and safety stock to maintain optimal inventory levels.
Formula
Reorder Point = (Average Daily Usage × Lead Time) + Safety Stock
Example
If a product sells 50 units/day, lead time is 5 days, and safety stock is 100 units, ROP = (50×5)+100 = 350 units.
Tags
#Reorder Point#Inventory Management#Materials#Warehouse#Supply Chain
Related Terms
Safety Stock
Inventory Turnover
Perpetual Inventory System
