What is Reorder Point (ROP)?
A reorder point is the inventory level at which a replenishment order should be placed to avoid running out before new stock arrives.
Definition
The reorder point (ROP) is the stock level that triggers a new purchase or production order, set so that on-hand inventory lasts through the replenishment lead time. It is typically calculated as average demand during lead time plus safety stock. When inventory drops to or below this level, the system signals that it is time to reorder. ROP-based replenishment is a simple, widely used method that works best for items with relatively stable, independent demand.
How Reorder Point Works in ERP
ERP inventory and planning modules store a reorder point and order quantity per item-location and continuously compare net available inventory against the ROP. When the threshold is crossed, the system either creates a planned order automatically or places it on a replenishment worklist for buyer review. Many systems can recalculate ROP periodically from recent demand and lead-time data so the trigger adapts as conditions change.
ERP Vendors with Strong Reorder Point
Frequently Asked Questions
What is the basic reorder point formula?
The standard formula is reorder point = (average daily demand x lead time in days) + safety stock. The first term covers expected usage while replenishment is in transit, and safety stock covers variability. Both inputs should reflect realistic, recent data to keep the trigger accurate.
When is reorder-point planning a poor fit?
ROP planning assumes relatively steady, independent demand, so it struggles with lumpy, seasonal, or highly dependent demand. For items whose demand is driven by a parent assembly or a forecast with strong trends, time-phased MRP or demand planning is usually more accurate. Many companies use ROP for low-value, stable items and forecast-driven planning for the rest.