1. What is Reorder Point and EOQ?

The reorder point (ROP) is the inventory level at which an order should be placed to replenish stock. The economic order quantity (EOQ) is the ideal order quantity that minimizes total inventory costs.

2. How These Calculations Work

The calculator uses these fundamental inventory management formulas:

Where:

• Lead Time Demand — Expected demand during lead time
• Safety Stock — Buffer stock to prevent stockouts
• Demand — Annual demand in units
• Order Cost — Cost to place one order
• Holding Cost — Cost to hold one unit for one year

Explanation: ROP ensures you don't run out of stock while waiting for new orders. EOQ balances ordering and holding costs to find the most economical order size.

3. Importance of Inventory Management

Details: Proper inventory management prevents stockouts while minimizing carrying costs. These calculations are fundamental to efficient supply chain operations.

4. Using the Calculator

Tips: Enter all values as positive numbers. For accurate results, use consistent time periods (all annual values or all monthly values).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between ROP and EOQ?
A: ROP tells you when to order, while EOQ tells you how much to order.

Q2: How do I determine my holding cost?
A: Include storage, insurance, depreciation, and opportunity costs of capital tied up in inventory.

Q3: What are limitations of EOQ?
A: EOQ assumes constant demand, fixed costs, and instant replenishment. It may need adjustment for seasonal items.

Q4: How often should I recalculate these values?
A: Review quarterly or whenever demand patterns, costs, or lead times change significantly.

Q5: Can I use this for perishable goods?
A: EOQ may need modification for perishables where holding costs increase over time.