Define reorder point and provide the formula under constant demand and lead time.

• A. The inventory level at which a new order should be placed; ROP = d × L
• B. The maximum inventory level allowed.
• C. The safety stock level.
• D. The total annual inventory cost.

Answer: (A)

The key idea is the stock level that tells you when to place a new order to prevent running out before the supplier arrives. Under constant demand and lead time, you know exactly how much you’ll use during the lead time, so the reorder point is simply the lead-time demand: ROP = d × L, where d is demand per time period and L is lead time. For example, if you sell 10 units per day and the lead time is 5 days, you’d reorder when inventory falls to 50 units. In this simple case there’s no safety stock, because variability is not considered. The other concepts described—maximum inventory level, safety stock, and total annual cost—do not define the trigger for replenishment in this scenario.