Setting accurate reorder points is essential for several reasons:
Avoid Stockouts: By setting reorder points, businesses can avoid the risk of stockouts, which can lead to lost sales and dissatisfied customers. Optimize Inventory Levels: Proper reorder points help optimize inventory levels, ensuring that there is enough stock to meet demand without excessive surplus. Efficient Cash Flow Management: Maintaining optimal inventory levels helps in managing cash flow more efficiently by reducing the amount of capital tied up in inventory. Improve Supplier Relationships: Consistent ordering based on reorder points can improve relationships with suppliers by providing them with regular and predictable orders.