Reorder-Point Basics
When steady demand meets a known lead time, reorder at d x L
EOQ told us how much to order; it says nothing about when. With steady demand and a known lead time, the reorder point is the stock level that triggers the next order so it arrives just as the shelf hits zero.
When to place the next order
Module 2 answered how much to order with the EOQ. This module answers when. Suppose Meridian Supply sells a steady d units a day and its supplier takes a fixed L days to deliver. The moment stock falls to the reorder point, Meridian places a new order; that order arrives exactly L days later, just as the shelf reaches zero. With no uncertainty, the reorder point is simply the demand accumulated over the lead time.
Reading the formula
With daily demand d=40 units/day and a lead time L=5 days, the reorder point is d x L = 40 x 5 = 200 units. The instant on-hand stock drops to 200, Meridian reorders; five days later the delivery lands and the shelf never empties. Raise the lead time and ROP rises; raise daily demand and ROP rises -- in both cases because more stock is consumed while the order is en route.
This first reorder point has no buffer because it pretends demand and lead time never wobble. Real demand bounces and real lead times slip, so a plain d x L reorder point will stock out whenever a day runs hot or a delivery runs late. The next three lessons add that buffer step by step: demand uncertainty, then a service-level target, then safety stock itself.
- 1. ROP = d x L = 40 x 5 = 200 units.
💡 Hint
- 1. ROP = d x L = 30 x 4 = 120 units.
Check your understanding
- With certain demand and lead time, the reorder point is ROP = d x L.
- It is the stock level that triggers a new order so delivery arrives as stock hits zero.
- It carries no buffer, so it assumes demand and lead time never vary.