Inventory Optimization | Reorder Point & Safety Stock

Demand below is driven by the ARIMA(1,0,1) forecast for All Categories — next period 519.14 units, not the historical average (513.11 units).

Inventory Parameters Input Form

Low-Stock Alert: SAFE

Current stock (415 units) is above Reorder Point (146 units).

Action: Stock is sufficient. Approximately 0.5 periods of cover remain before the reorder point is reached.

415.0 units

Current Inventory Level

146.09 units

Reorder Point ($ROP$)

24.96 units

Safety Stock ($SS$)

352.37 units

Economic Order Quantity ($EOQ$)

Forecasted Demand Driving These Figures

Period ahead	t+1	t+2	t+3	t+4	t+5	t+6
Forecast demand (units)	519.1	518.2	517.5	516.9	516.4	516.0

Reorder point uses t+1 = 519.14 units; EOQ annualises the mean of the forecast horizon to D = 6208.06 units/year.

Mathematical Formulas Breakdown

Forecast Demand, next period ($\hat{Y}_{t+1}$):	519.14 units/month — ARIMA(1,0,1) forecast
Average Daily Demand ($D_{daily} = \hat{Y}_{t+1}/30$):	17.3 units/day
Demand During Lead Time ($D_L = D_{daily} \cdot L$):	121.1324 units (17.3 $\times$ 7.0 days)
Service Level Factor ($Z$ for 95.0%):	$Z = 1.645$
Demand Std. Deviation ($\sigma$):	31.41 units
Lead-time Std. Deviation ($\sigma_L = \sigma\sqrt{L}$):	15.1704 units
Safety Stock ($SS = Z \cdot \sigma \cdot \sqrt{L}$):	24.96 units
Reorder Point ($ROP = D_L + SS$):	146.09 units

Rule: when current inventory falls below the reorder point, the system raises a low-stock alert and recommends an order.

Order Quantity & Investment (EOQ)

$$EOQ = \sqrt{\frac{2 D S}{H}}$$

Annual Demand ($D$, from forecast):	6208.06 units/year
Ordering Cost ($S$):	₹500.0 per order
Holding Cost ($H$):	₹50.0 per unit per year
Economic Order Quantity:	352.37 units
Total Annual Inventory Cost:	₹17618.2544
Recommended Order Now:	352.37 units

EOQ is the order size that minimises the sum of ordering cost and holding cost.