Hi Cheta,
this is my understanding of the different terminologies.
re-order point is what it sounds like. The point at which you need to re-order materials. (either manualy or using an automated system).
The 'minimum stock' is another term for 'safety stock'. i.e. the level you do not want to go below in order to cope with demand variation and supply variation.
There are various views on calculating this 'safety stock' but here is a link to an intersting article.
http://www.inventoryops.com/safety_stock.htm
Once you have decided on 'safety stock' level then calculating re-order point is relatively easy as it is 'safety stock' + average demand x replenishment lead time.
Hope this helps, if other have different interpretations, please post....
John Hardwick
FIOM
Quote: cheta, Thursday, 28 Aug 2008 07:44Hi,
I have always thought that Reorder Point is the same as Minimum Stock Level. That is until I was told they are two different things.
Am I mistaken here? I have looked up many articles that seem to imply Reorder Point and Minimum Stock Level. Is it just a matter of terminology?
If they are different, what are the formula that is used to calculate that?
All I've got is that:
Re-order Point = Expected Dd during Lead Time + Safety Stock
Can anyone help clarify this with formulas to calculate them?
John Hardwick
FIOM
Difference between Reorder Point and Minimum Stock Level
28 Aug 2008, 07:44