Reorder Point Planning: A Comprehensive Guide

Reorder point planning involves comparing available MRP stock with the reorder point. If available stock is less than the reorder point, procurement is triggered. The reorder point is composed of expected average material requirements during replenishment lead time and safety stock. Safety stock covers excess material consumption and delayed deliveries. The reorder point is calculated as safety stock plus daily requirement times lead time. Inventory management monitors plant stock during reorder point planning, creating entries for planning runs if withdrawals or returns fall short of the reorder point.

Reorder point planning is a vital aspect of inventory management that ensures businesses maintain optimal stock levels. This strategy involves comparing the available Material Requirements Planning (MRP) stock with the reorder point. If the available stock falls below the reorder point, procurement is triggered. The reorder point is composed of the expected average material requirements during replenishment lead time and safety stock [1].

Safety stock is a crucial component of the reorder point. It covers excess material consumption within the replenishment lead time and any additional requirements that may occur due to delivery delays [1]. In manual reorder point planning, the reorder level and safety stock level are defined manually in the appropriate material master. Conversely, in automatic reorder point planning, both levels are determined by the integrated forecasting program [1].

The system uses past consumption data and forecasts future requirements to calculate the reorder level and safety stock level. It considers the service level, which is specified by the Material Requirements Planning (MRP) controller, and the material's replenishment lead time [1][2]. Since the forecast is carried out at regular intervals, the reorder level and safety stock level are continually adapted to the current consumption and delivery situation, contributing to keeping stock levels low [2].

Reorder point planning is essential for maintaining efficient inventory management. It helps businesses avoid stockouts, minimize holding costs, and ensure that they have the necessary materials to meet customer demand. By understanding the concepts and benefits of reorder point planning, businesses can effectively implement this strategy and optimize their inventory management processes.

References:
[1] Ramakrishna, R. (2020, May 14). Reorder point planning. SAP Community. https://community.sap.com/t5/enterprise-resource-planning-q-a/reorder-point-planning/qaq-p/2519609
[2] Quanweiru. (2012, September 2). Reorder point overview. CNBlogs. https://www.cnblogs.com/quanweiru/archive/2012/09/02/2667315.html