1. The following animation is an example of good re-order point usage.
The delivery time of the raw materials is 7 days.
The re-order point is set to 500 and the order size is set to 100 units.
Press enter and the slide show begins…
Virtual Teams in International Business

2. Inventory size gets below the re-order point
1.000
Inventory size gets below the re-order point
900
800
100 units ordered
700
600
Re-order point 500
500
400
300
200
Order size 100
100
Inventory
1 day to
delivery
2 days to
delivery
3 days to
delivery
4 days to
delivery
5 days to
delivery
6 days to
delivery
7 days to
delivery

3. One day passes, some more materials consumed
1.000
900
The delivery moves forward
800
Inventory + DELIVERY exceed re-order point so NO new raw materials are ordered
700
600
500
400
300
200
100
Inventory
1 day to
delivery
2 days to
delivery
3 days to
delivery
4 days to
delivery
5 days to
delivery
6 days to
delivery
7 days to
delivery

4. Inventory + delivery gets below re-order point – a new order is made
1.000
Another day passes, some more materials consumed, the delivery moves forward
900
800
Inventory + delivery gets below re-order point – a new order is made
700
600
500
400
300
200
100
Inventory
1 day to
delivery
2 days to
delivery
3 days to
delivery
4 days to
delivery
5 days to
delivery
6 days to
delivery
7 days to
delivery

5. Another day passes, some more materials consumed
1.000
900
The deliveries move forward
800
Inventory + DELIVERY exceed re-order point so no new raw materials are ordered
700
600
500
400
300
200
100
Inventory
1 day to
delivery
2 days to
delivery
3 days to
delivery
4 days to
delivery
5 days to
delivery
6 days to
delivery
7 days to
delivery

6. Another day passes… Inventory 1 day to delivery 2 days to delivery
1.000
Another day passes…
900
800
700
600
500
400
300
200
100
Inventory
1 day to
delivery
2 days to
delivery
3 days to
delivery
4 days to
delivery
5 days to
delivery
6 days to
delivery
7 days to
delivery

7. Next day… Inventory 1 day to delivery 2 days to delivery 3 days to
1.000
Next day…
900
800
700
600
500
400
300
200
100
Inventory
1 day to
delivery
2 days to
delivery
3 days to
delivery
4 days to
delivery
5 days to
delivery
6 days to
delivery
7 days to
delivery

8. Another day passes… Inventory 1 day to delivery 2 days to delivery
1.000
Another day passes…
900
800
700
600
500
400
300
200
100
Inventory
1 day to
delivery
2 days to
delivery
3 days to
delivery
4 days to
delivery
5 days to
delivery
6 days to
delivery
7 days to
delivery

9. Next day… Inventory 1 day to delivery 2 days to delivery 3 days to
1.000
Next day…
900
800
700
600
500
400
300
200
100
Inventory
1 day to
delivery
2 days to
delivery
3 days to
delivery
4 days to
delivery
5 days to
delivery
6 days to
delivery
7 days to
delivery

10. Another day passes… Inventory 1 day to delivery 2 days to delivery
1.000
Another day passes…
900
800
700
600
500
400
300
200
100
Inventory
1 day to
delivery
2 days to
delivery
3 days to
delivery
4 days to
delivery
5 days to
delivery
6 days to
delivery
7 days to
delivery

11. Next day… Inventory 1 day to delivery 2 days to delivery 3 days to
1.000
Next day…
900
800
700
600
500
400
300
200
100
Inventory
1 day to
delivery
2 days to
delivery
3 days to
delivery
4 days to
delivery
5 days to
delivery
6 days to
delivery
7 days to
delivery

12. Another day passes… Inventory 1 day to delivery 2 days to delivery
1.000
Another day passes…
900
800
700
600
500
400
300
200
100
Inventory
1 day to
delivery
2 days to
delivery
3 days to
delivery
4 days to
delivery
5 days to
delivery
6 days to
delivery
7 days to
delivery

13. In summary…
When both the re-order point and the order size are set right, you can achieve high inventory turnover and minimize waste from inventory.
Crusial is the estimate of the re-order size – if you set it too low, you will run out of raw materials and loose the potential of the ordering system.
Virtual Teams in International Business