Reorder point is the minimum amount of inventory a business must maintain in order to meet customer demand and avoid running out of stock. This point is determined by calculating the lead time, or the time it takes for an item to be ordered, delivered, and made available for customers to purchase. The lead time is multiplied by the average daily demand for the item to arrive at the reorder point. For example, if the lead time for a product is one week and the average daily demand rate is 5 units, the reorder point is 35 units. By understanding the reorder point and actively tracking inventory levels, businesses can ensure they never run out of stock and always deliver on customer expectations.