1.

Introduction

The complexity of current Supply Chains forces the

organizations to innovate Inventory Replenishment Schemes
traditional. In line with market requirements, the decision to
maintaining inventory of materials and finished products must comply
to the proposed Supply Strategy and to the commitments of time and
service along the chain
Optimization must be sought and it can be achieved by answering the
following questions: What types of channels, customers, and products are
Does it require maintaining inventories? Which specific products and which points?
of the chain is required to be kept in inventory? and with what
information is available to make tactical and operational decisions that
Will they ensure that these inventories achieve their objective?

More than 25% of the equipment downtime hours are due to faults of
materials and spare parts necessary to execute correctly the
repairs on the first attempt.

In inventory management, we find basic tools where

highlights the EOQ model (economic order quantity). This model
it emphasizes that both the demand and the replenishment time are constant and
known; this limits its practical application since it is subject to the
uncertainty. With uncertainty existing, it will be necessary to establish the
Instock (α) that allows to limit the probability of stockout to a
target value (1-α) during the recovery time, in this context the
reorder point (ROP) determines the moment when it will be
It is necessary to place a new order.
 A term that needs to be understood beforehand is assortment planning.

The planning of restocking is the management, administration, or direction that

allows participants in the procurement process to have a
a more critical view of the demand for products, in order to have a
excellent replenishment to meet future demands.
Recovered The provided text is a URL and does not contain translatable content.
administration/how-to-apply-the-reorder-point-in-your-company

The person in charge or the procurement manager has the obligation to ensure
the proper supply of the products to be marketed through a
sales and demand forecast, inventory planning that guarantees
in a timely manner the existence and availability of each product in store
for sale.

2. Replenishment Time (RT):

It is the inventory level of a product at which the need is indicated.

to place an order or a restock. It is the period of time understood
from the point of reorder is reached until the new material
is received at the warehouse (generally to reach the Maximum level of
Inventory). This time includes the generation of the requisition for
material, authorizations, bidding for the material, placing the order of
purchase, transport, reception and any other time that takes to the
material to obtain its place on the warehouse shelves. This parameter
it is crucial for maintenance and can vary from company to company
even from country to country, it can be affected by multiple factors both
internals as well as externals, such as: the internal procedures, the
local regulations and laws, the type of material, the location and the age
from the plant, etc. This is a parameter that must be determined by the
materials personnel and generally it is an average value.
The reorder point can be obtained with a simple formula:

R = DTe + B

Where:
R=Re-order Point
D=average demand per day
B=Safety Inventory
Average delivery time in days

For this, it is generally necessary to consider and answer the following

preguntas: ¿Cuándo debo ordenar? y ¿Qué cantidad debo Ordenar?
There are several references to answer the first question.
Generally, the reorder point occurs when the stock of the item reaches
at the value of:

(Maximum demand) x (Replenishment time)

[Link] = (Minimum stock of the item + 1)
(Daily demand x Average replenishment time) + stock of
security

How Much and When to Restock Inventory?

Two of the major challenges in purchasing and inventory lie in

determine when and how much to buy.

It depends on the company and its activity; different strategies will be used.
to place the order. Some companies, for example, work as a
taxis making races, these will already have a fixed amount each time, whether it is
setting the amount of money to spend or the volume. When it is a
fixed amount every time we have an ordering system. Other companies
they cover longer distances because they travel to other cities for a few days
and others not, this is a variable amount and is related to a system
of variable order.
Based on the example we can conclude that the decision of WHEN to do it
An order basically depends on the type of review that is applied to the
articles. If the review is PERIODIC, the order is made every certain
time. On the other hand, if the review is CONTINUOUS, the decision of when
placing an order is deduced from the comparison between the stock level
available and the quantity calculated by the reorder point method.

a) Continuous review system

When we define that an article is reviewed continuously, it means

that inventory levels are continuously reviewed after
where transactions or movements take place in the system (software).
The continuous review system has the following characteristics:

When the inventory level falls below a certain point

default (called reorder point) must be placed
order for a new quantity of product that is fixed (constant)
every time).
The inventory level at which a new order should be placed is usually
be specified as a point for a new order.
The inventory that is defined as reorder point or point of
order must guarantee inventory availability while the
supplier fulfills the order (lead time)
It is also known as fixed reorder quantity system.

Q = √(2 x dx Cp) / Ca
Pp = Ai + (Lt x d)
Qmax = Ai + Q
Optimal Order Quantity
Demand
Cost of ordering
Ca = Cost of storage
Pp = Reorder point
Ai = Inventory Buffer
Lt = Lead Time / Replenishment Time
Maximum Inventory

b) Periodic review system

When we define that an article is reviewed periodically

it means that the inventories are reviewed at equal time intervals,
for example, every week, every month, every semester, etc.; the time
to acquire a new order, it usually coincides with the beginning of each
time interval.

For example, in the case of the merchant who receives a visit from a
seller (takes orders) once a week and has no possibilities
to request deliveries off-route. The product will arrive in a timely manner.
after the seller picked up the order.

In this inventory replenishment system, each interval is reviewed.

fixed time and the goal is to reach a level of inventory Qmax
that covers the demand until the next review period, the size
of the orderQvaria with the behavior of the demand.
 Q = d(T + L) + Ai - I
Optimal order quantity
Demand
Optimal inventory level
Lead Time
Ai = Inventory buffer
I = Current inventory level

Best practices for Re-order Point

In order to apply this level of inventory in a company, it is necessary to

with the support of various tools, systems, or techniques that benefit
the inventory procedure. In order to adopt this methodology, it is
it is necessary to take into account the following terms:

Levels of material or inventory, with which are counted in the

warehouse.
Critical levels of existence, that is, the minimum amount of
products that need to be kept in the warehouse.
Maximum and minimum capacity of products that need to be available
in the warehouse.

Once the company becomes aware of this information, it can

start to incorporate the reorder point for your products, from that
will manage to prevent their sales from decreasing and that customers remain
dissatisfied.

Most common reorder point errors

Implementing this system does not affect the quality of the procedure.
of the inventories, as they can be constantly modified
mostly through software automation or any other
stock maintenance strategy that achieves representation through
of practices that may change over time.

The great orders that are uncommon are found in the

companies that are not updated within the dynamics of their points
of reorder. Despite this, the main cause of the problem is not this
inventory level, but the lack of software automation that can
constantly update this level.

If the company does not have a reorder point in its inventory,

methodologies, systems or tools that control inventory, you are given
 they can present a series of consequences and problems such as the
following:

The suspension of production by the company, for not having the

suitable raw materials or are not sufficient for a correct
production of products.
The dissatisfaction of customers due to the lack of a good
inventory that can meet their needs.
The considerable economic loss for the company.
Excessive amounts of products in the company that generate
unnecessary expenses.

Other terms that we need to be clear about are:

Safety Stock:

Many times it is confused with the reorder point or with the Minimum Level
of Inventory. In fact, the safety stock can be determined by
one or the other of these parameters, depending on the policy of each plant,
but basically, as its name indicates, it is about an amount
stock established in the warehouse that allows us to protect ourselves from a failure of
this item in the warehouse (Stockout). This parameter is usually
used only in critical items or where lead times are short
reliable in order to guarantee the operational continuity of the
teams.

The first three terms of this list (replenishment time, demand

and service factor) can be considered as the most important
to be able to establish the inventory strategy of any company.

Inventory optimization ends up being an art that few master,

it is something that ranges from offering an optimal stock of parts to meet
any type of maintenance tasks, even maintaining a cost of
not so high storage, these are two opposing forces that must
be balanced to optimize operations.
Demand and demand trend:

The average demand (AD) is basically the use given to an item.

specific in a given time period, generally the last 24
Months give us a good trend of the usage history of an item.

Some maintenance-related factors can affect the evaluation.

from the demand. The maintenance by campaigns or by seasons,
increase in team population, modification or optimization of
the maintenance tasks, adjustments of the operational parameters,
obsolescence of equipment and even the increase or decrease of the
reliability can affect this value, so it should be taken very
Be careful to have the entire operational overview before evaluating and defining.
this parameter.

It is possible to determine the average demand for an item, even without counting.
with historical data, this is done through the following equation:

DP = (Population of teams / TPEF)

Where the average time between failures (MTBF) can be determined with
tools like OREDA.

Service factor:

The service factor is a number that indicates the probability that

the demand be satisfied with the existing inventory. This factor is
primarily used for inventory classification purposes and is
assigned to an item or groups of them according to their criticality, and it is there, where
its importance lies in classifying the parts.
according to the criticality of the equipment to which they belong, more than applying
the value of the service factor as such.

The following table shows us the value of the service factor according to
criticality of the equipment.
 Maximum inventory level (MAX):

There are several alternatives, one of which is calculated as follows

equation:

MAX = DP * A period of time.

Where:
DP: It is the average demand and the time period is generally 24
months. In this equation, the MAX value must not be lower than the re-
order.

There is another formula based on the economically reasonable amount.

EOQ is nothing more than the quantity that balances the cost of inventory.
existing Item against the cost of the purchase order placed, this
method us indicate what

MAX = MIN + EOQ

Minimum Inventory Level (MIN):

Just like for the maximum, there are several formulas for the minimum, but
the one we will see is the following:

MIN = (TR x DP) - MAX

3. Conclusions:

4. References:

- Unable to access the content of the provided URL.

[Link]
apply-the-reorder-point-in-your-company/
- Invalid URL provided. Please provide a text for translation.
reorder/#Best_practices_of_the_Reorder_Point
PDF, "Warehouse Logistics Book"