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The reorder point (ROP), also reorder level (ROL) or "optimal re-order level", [1] is the level of inventory which triggers an action to replenish that particular inventory. It is a minimum amount of an item which a firm holds in stock, such that, when stock falls to this amount, the item must be reordered.
In inventory theory, the (Q,r) model is used to determine optimal ordering policies. [1] Its is a class of inventory control models that generalize and combine elements of both the Economic Order Quantity (EOQ) model and the base stock model. [2]
If there are backorders, the reorder point is: =; with m being the largest integer and μ the lead time demand. Additionally, the economic order interval [ 8 ] can be determined from the EOQ and the economic production quantity model (which determines the optimal production quantity) can be determined in a similar fashion.
Reorder point – Inventory level triggering replenishment Inventory control system – Ensuring the correct level of stock Pages displaying short descriptions of redirect targets Extended newsvendor model – Mathematical model to assist inventory levels Pages displaying short descriptions of redirect targets
Total cost function and optimal reorder point. The total cost is given by the sum of holdings costs and backorders costs: = + It ...
Prior to MRP, and before computers dominated industry, reorder point (ROP)/reorder-quantity (ROQ) type methods like EOQ (economic order quantity) had been used in manufacturing and inventory management. [1] MRP was computerized by the aero engine makers Rolls-Royce and General Electric in the early 1950s but not commercialized by them.
Inversely, the total holding cost increases as the production quantity increases. Therefore, in order to get the optimal production quantity we need to set holding cost per year equal to ordering cost per year and solve for quantity (Q), which is the EPQ formula mentioned below.
The use of the MAPE as a loss function for regression analysis is feasible both on a practical point of view and on a theoretical one, since the existence of an optimal model and the consistency of the empirical risk minimization can be proved. [1]