What is the point of change?

point of reassessment is a level at which a specific item should be found in the inventory supplemented by placing an order with the supplier. Also referred to as ROP, this point of reassessment is usually determined by different methods that ensure that the item is delivered before it is needed for any purpose. Purchase agents and supply officials also usually look closely at the number of units required for each order, effectively maintaining materials at hand on what is known as the amount of economic order or EOQ.

When setting a point of reassessment for any product, two key factors are connected. One has to do with use. For example, a production plant can use several sets of machines that use a specific component. In order to prepare for possible disorders of these sets, the decision can be adopted to keep enough spare parts at hand to repair at least sixty percent of these machines. Assuming this number is based on past experienceOst, where not more than only machines required the replacement of component in a short period of time and set the point setting for slightly more protecting business from losses due to shortening the production time.

Together with use, setting a point of reassessment also requires an understanding of how much time is likely to go between placing the order and delivery. For routine items that are usually stored in stock, the waiting period may not be more than a few working days. If the item in question is somewhat unique, the supplier may require several weeks to produce and send the number of required units. In order to minimize the potential for restrictions on operations during this waiting period, the reworking point is set to start, if there is still a higher number of units on hand that can be called before arrival.

Many companies once estarically suppressIL point of changes for different stocks. This sometimes included the use of formulas to determine the average use for months and the average delivery time associated with each inventory item. Today, businesses usually use Inventory software that has the ability to analyze any income and distribution of items from the inventory and adjust each item as needed. If the software works efficiently, inventory levels are maintained to ensure that there are sufficient stocks at hand, but also maintains the overall inventory value as low as possible, a function that helps minimize the tax burden on the company.