Reorder Point
The calculation of the reorder point should ensure that the inventory level reaches zero at the end of each reordering cycle. This is because a positive inventory level at the end of the cycle results in an increase in average inventory and associated costs. To ensure that this condition is satisfied, reorder level is set equal to the number of units that are estimated to be used during the lead-time. This is equal to the product of demand per unit time and lead-time, where unit time and lead-time are expressed in the same units.
Reorder Point = d * LT
Where, d = Average Daily Demand
LT = Lead time
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