Order Point

An inventory replenishment technique which considers forecasted demand over replenishment lead time, plus an allowance for safety stock. When the available inventory of an item drops below the order point, a replenishment order is triggered. This technique assumes that demand is linear and consistent, and as such is not appropriate for virtually all items with dependent demand. The “two-bin”, “min-max”, and “order-up-to” techniques are all variations of the basic order point approach.