What is "Reorder Point" in inventory management?

The concept of "Reorder Point" is critical in inventory management as it determines when new inventory should be ordered. Specifically, it refers to the stock level that triggers the need to replenish inventory to avoid stockouts. When the inventory level reaches this point, it signals to the management that it is time to place a new order to ensure that products remain available for customers and operations can continue smoothly.

This approach helps maintain optimal inventory levels, balancing the costs associated with holding excess stock against the risk and potential cost implications of running out of inventory. Therefore, understanding the reorder point allows businesses to manage their inventory efficiently, forecast demand accurately, and ensure a steady supply of products.

In contrast, other options describe different aspects of inventory management. Identifying the best-selling product focuses on sales performance rather than stock management. The maximum stock level before ordering is related to inventory limits rather than the timing of orders. Lastly, the time it takes to receive new inventory pertains to lead time and logistics rather than the specific trigger for placing orders.