Briefly explain reorder point and safety stock concepts.

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Reorder point and safety stock describe when to reorder and how much cushion to keep to guard against uncertainty. Reorder point is the inventory level at which you trigger a replenishment order so you have enough stock to cover demand during the supplier’s lead time. It’s calculated by taking the expected demand during lead time and adding safety stock. Safety stock is the extra inventory kept above the expected usage to absorb variability in demand or delays in supply, helping you avoid stockouts and maintain a desired service level. In practice, you don’t aim for the maximum level or treat the reorder point as the order quantity; you use the reorder point as the trigger and safety stock as the built-in buffer. The larger the lead time or the more unpredictable demand, the more safety stock you carry to smooth operations.