Explain the standard reorder point (ROP) formula under constant demand with lead time.

Explain the standard reorder point (ROP) formula under constant demand with lead time.

• A. ROP = d × L
• B. ROP = D / L
• C. ROP = L × h
• D. ROP = d + L

Answer: (A)

When demand is steady and lead time is fixed, you want enough inventory to cover what you’ll use during the wait for a new order. The amount you need is the consumption rate times the lead time: ROP = d × L, where d is units per time and L is the lead time in those time units. For example, if you burn through 20 units per day and the supplier delivers in 5 days, you should reorder when you have 100 units on hand (20 × 5). This makes sense because you’ll exactly meet the demand during the 5 days while the new stock is in transit, with no safety stock. Other formulas don’t fit because they mix different units or represent different quantities (like cost or annual totals), so they wouldn’t yield a correct inventory trigger.

When demand is steady and lead time is fixed, you want enough inventory to cover what you’ll use during the wait for a new order. The amount you need is the consumption rate times the lead time: ROP = d × L, where d is units per time and L is the lead time in those time units.

For example, if you burn through 20 units per day and the supplier delivers in 5 days, you should reorder when you have 100 units on hand (20 × 5). This makes sense because you’ll exactly meet the demand during the 5 days while the new stock is in transit, with no safety stock.

Other formulas don’t fit because they mix different units or represent different quantities (like cost or annual totals), so they wouldn’t yield a correct inventory trigger.