Which formula correctly represents Reorder Level (ROL)?

• A. Lead time × Safety stock.
• B. (Average daily usage × Lead time) + Safety stock
• C. Average daily usage × Lead time
• D. (Average daily usage × (Lead time + Safety stock))

Answer: (B)

Reorder level is the inventory level at which you should place a new order to avoid a stockout during the supplier’s lead time. It combines two parts: the amount you expect to use during the lead time, and a buffer for variability. The demand you expect to cover while waiting for the new stock is the average daily usage times the lead time. To protect against fluctuations in demand or delays, you add safety stock on top of that. So the correct formula is (average daily usage × lead time) + safety stock.

For example, if you average 120 units per day, lead time is 4 days, and you keep 360 units as safety stock, the reorder level would be 120 × 4 + 360 = 480 + 360 = 840 units.

The other options miss either the need to cover the lead-time demand, or they inappropriately mix the safety stock with the lead time, which would miscalculate the buffer or the actual lead-time demand.