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The reorder point (R) given an average daily demand of 78 units and a lead time of 3 days 234.
The reorder point formula is as follows: Reorder Point (ROP) = Demand during lead time + safety stock.
Safety stock is a term used by logistics personnel to describe additional inventory held to mitigate the risk of stockouts (raw material or packaging shortages) due to supply and demand uncertainties. With sufficient safety stock, business operations can continue as planned [1]. Safety stock is retained in the event of uncertain demand, supply, or production and acts as insurance against stockouts.
Safety stock is an additional quantity that you keep on hand to reduce the risk of an item being out of stock. This acts as a buffer inventory when sales are higher than planned or when the supplier is unable to deliver additional units at the expected time.
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