Why is the Reorder Point not a stocking level?
Do not confuse the Reorder Point with a stocking level.
•A stocking level is a planned quantity of stock on hand expressed as an average, minimum, or maximum. DBA does not include stocking levels because they lack t-phasing and do not account for supply in progress.
•A Reorder Point is a trigger point for job or PO generation calculated from a monthly Usage rate and Safety Factor applied to replenish time. Whenever current demand causes total supply from stock on hand and inbound jobs or POs to fall below the Reorder Point, a job or PO gets generated.
The Reorder Point is a timing-related field
The Reorder Point is a timing-related field that determines when a job or PO gets triggered. It is not an order quantity or a stocking quantity.
The Supply Days interval determines order quantities
Order quantities are determined by the Supply Days interval. The Supply Days interval is applied to the monthly Usage rate and Safety Factor to calculate a Min Order quantity. When a job or PO gets generated, the quantity will be equal to current net demand or the Min Order quantity, whichever is greater.
WARNING: Do not use manual Reorder Points
When an item is assigned the Stocking (Manual) order policy, the Reorder Point can be entered manually without calculation from a monthly usage rate and replenish time. This order policy is not recommended because a manual Reorder Point has no logical basis for its value and often gets used by mistake as a stocking level, which can result in severe over-stocking.
