Re-order Point
Re-order point = (average demand × lead time) + safety stock. When current stock drops to this level, trigger a purchase order.
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Formula, assumptions, and limits
| Symbol | Meaning | Unit |
|---|---|---|
| Mean demand per period | units | |
| Lead time | periods | |
| Safety stock | units |
Source: Silver-Meal & Peterson - Inventory Management
In short
Re-order point = (average demand \u00d7 lead time) + safety stock.