Reorder Point (ROP)

The Reorder Point (ROP) is the specific inventory level at which a company should reorder goods to avoid running out. It considers factors like how long it takes to get new stock (lead time) and average usage rate. When inventory drops to the ROP, an order is triggered so that new stock arrives just in time, maintaining continuous supplies without excess. In essence, ROP helps balance having enough inventory to meet demand while minimizing storage costs and stockouts.