Reorder point planning uses demand forecasts to decide when to order a new quantity to avoid dipping into safety stock.
Reorder point planning suggests a new order for an item when the available quantity—on–hand quantity plus planned receipts—drops below the item’s safety stock level plus forecast demand for the item during its replenishment lead time. The suggested order quantity is an economic order quantity that minimizes the total cost of ordering and carrying inventory. Oracle Inventory can automatically generate requisitions to inform your purchasing department that a replenishment order is required to supply your organization.

Reorder-point planning uses the following pieces of information:
• Available Quantity

Safety Stock Safety stock for an item is the quantity of an item that you plan to have in inventory to protect against fluctuations in demand and supply. You can enter your own safety stock quantities, or Oracle Inventory can calculate safety stock based on an existing forecast for the item.

Item Demand The reorder point planning routine uses the average demand during the replenishment lead time. Oracle uses forecast information to calculate average demand.

On a normal circumstance its a summation of all the forecats.

Replenishment Lead Time Replenishment lead time is the total time between recognizing the need for items and the receipt of items. You can enter three components of order-processing lead times:
• Preprocessing lead time
• Processing lead time
• Postprocessing lead time
Oracle Inventory calculates reorder point planning lead time by adding all three components of processing lead time.

EOQ/Reorder Quantity
Reorder quantity = Economic Order Quantity (EOQ)
The economic order quantity is the quantity that minimizes the total cost of ordering and storing inventory.
EOQ = SQRT {[2 * (annual demand) * (order cost)]/(carrying cost percent *unit cost)}

Annual carrying cost = carrying cost percent*unit cost

Oracle Inventory calculates annual demand information from the forecast that you provide when you perform reorder point planning.

The EOQ increases as demand increases, since the cost of carrying a larger order is smaller because the inventory is not carried as long. EOQ also increases when the cost of preparing an order increases. This is to avoid making too many orders and thus incurring this cost more often than necessary. On the other hand, the more it costs to carry inventory, the smaller the EOQ since it costs more to carry the excess inventory.

You can constrain the reorder quantity by specifying the following information for each item:
• Fixed-lot multiplier
• Minimum order quantity
• Maximum order quantity

Order cost
The cost associated in ordering the item.

Carrying cost
The cost associated in carrying the item in inventory.