Reorder Point

Tags: Glossary

The inventory level at which a new order for a product should be placed.

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What does Reorder Point mean?

Reorder point is the minimum level of inventory that a business needs to maintain to avoid stockouts. It is the point at which a business should reorder more products to ensure that there is enough inventory to meet customer demand. The reorder point is calculated by taking into account the lead time for delivery, the average rate of sales, and the safety stock level. Setting an appropriate reorder point is critical to ensuring that a business can meet customer demand while minimizing inventory holding costs. 

Related Glossary terms

Consignment Inventory

Excess Inventory

Finished Goods Inventory (FGI)

Inventory Turn

Negative Inventory

Safety Stock

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