The Reorder Point (ROP) is a crucial inventory management metric that indicates when a new order should be placed to replenish stock. It is calculated based on the average daily usage of an item and the lead time required to receive new stock. This helps businesses avoid running out of essential items while ensuring they do not overstock. By monitoring the ROP, companies can maintain optimal inventory levels, reduce carrying costs, and improve customer satisfaction. Effective use of the ROP can lead to better cash flow management and streamlined operations, making it an essential tool for supply chain management and logistics.