Map
Framework

Reorder point and safety stock

The question it answers

A warehouse manager has to decide at what stock level to reorder and how large a buffer to hold, so the shelf does not empty while the supplier's delivery is on its way.

Origin
Chopra, 2019, ch. 12; Slack et al., 2022, ch. 13
Diagram type
Process by phase
Level of analysis
Firm
Topics
Supply chain & operations
Delivery lorry pulling a chain of linked glass boxes, icon for supply chain

Diagram

Reorder point and safety stock

  1. Set up
  2. Estimate demand over the lead time
  3. Add a buffer for service level and variability
  4. Set the reorder point
  5. Operate
  6. Order Q when stock hits the point
  7. Adjust the reorder point when demand, variability or lead time change, for example seasonally

Pitfalls

Pitfall

Keeping one fixed reorder point all year for a seasonal item. Chopra's example: the same point can equal ten days of demand in the low season but only two in the peak, so stock-outs are certain; mean demand and its standard deviation must be adjusted by time of year.

Sources

References

Listed A–Z by author surname, Harvard style. A source with a DOI links to https://doi.org/…; one without links to its page or says plainly that it has no DOI.

  1. Chopra, S. (2019) Supply chain management: strategy, planning, and operation (7th global edn). Harlow: Pearson.No DOIpearson.comCited in 4 articles
  2. Slack, N., Brandon-Jones, A. and Burgess, N. (2022) Operations Management (10th edn). Harlow: Pearson.No DOIpearson.comCited in 3 articles