Quantitative Analysis for Management, 13/e

6.4 Reorder Point: Determining When to Order

Now that we have decided how much to order, we look at the second inventory question: when to order. The time between placing and receiving an order, called the lead time or delivery time, is often a few days or even a few weeks. Inventory must be available to meet the demand during this time, and this inventory can either be on hand now or on order but not yet received. The total of these is called the inventory position. Thus, the when to order decision is usually expressed in terms of a reorder point (ROP), the inventory position at which an order should be placed. The ROP is given as

The reorder point (ROP) determines when to order inventory. It is found by multiplying the daily demand times the ...