# What is Reorder Point?

What is Reorder Point? The inventory level at which a new order must be placed with the supplier. ROP = (Average Daily Sales × Lead Time) + Safety Stock.

## How it works in practice

Reorder point is inventory management's 'alarm.' When you hit the ROP, the order goes out automatically. The logic: ROP is calculated so inventory won't run out before the new stock arrives.

## Related metrics

- Safety Stock — part of the ROP calculation
- Lead Time — a key factor in ROP
- Demand Forecasting — ROP accuracy depends on forecasting
- Stockout — a correct ROP prevents stockouts

## Common misconception

'ROP stays fixed forever.' ROP changes with seasonality (a dress shop → higher ROP before a holiday), supplier changes (new lead time), and growth (rising daily sales). Update ROP at least quarterly.

## How to fix it

Hitting ROP too late (stockout before the shipment arrives)? (1) Check your lead-time calculation — is it accurate? Add a 20% buffer, (2) Check average daily sales — does it account for seasonality? (3) Set up ROP alerts in Shopify/your WMS — don't check manually.

## Real-world example

Supplement store: ROP 50 units, lead time 21 days, sales 4/day. ROP = 4×21 + safety = 84 + 30 = 114. Their ROP was off by 64 units — a stockout every month. Fixing the ROP led to zero stockouts the following quarter.

## Where to start

Calculate and update ROP quarterly for every Category A SKU. Set an alert in your WMS/Shopify when inventory hits the ROP. Automate the action: an email to the supplier with a ready-made PO.

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Category: Logistics · From the [Jimmy OS KPI Glossary](https://jimmy-os.com/glossary/kpi.md) · Source page: https://jimmy-os.com/glossary/kpi/reorder-point