Reorder Point
Overview Home Investment Planning CVP analysis

Planning Pricing Software Forecasting

Reorder Point Process

The program allows to use the "reorder point" to maintain the stock replenishment process by way of a routine updating of the end product output forecast. The demand forecast is usually uncertain, and the CVP optimizer provides a well-balanced evaluation for each production program ensuring the best and smooth production flow and the highest rate of monetary income flow. Of course, if the forecast for the sales of one type of product is too optimistic, some part of that stock still remains unsold by the end of the estimated period (the reorder point level will be reached later). Also it may be necessary to order other products ahead of the scheduled time. The financial losses for a product group as a whole will be the least possible. The rate of the proceeds flow for a large group of products will be more regular and steady due to the law of large numbers and will be very close to the highest value because of the use of the CVP optimizer. The program uses the simplest built-in "make-to-stock" model to meet the needs of a small trading company: it sells what it has purchased. Real models are much more complicated, but a balanced estimation of the rate of end product sales is a critical parameter for any of them.