OverviewRegulation of ErythropoiesisCredit: http://www.sciencedirect.com/science/article/pii/S0272638610004828
The normal life span of a healthy red blood cell is 120 days and it takes about 17 days to form a mature erythrocyte. But even with this disparity, there is a remarkable balance that exists between RBC production and destruction.
Requirements of Erythropoiesis
 Requirements of ErythropoiesisCredit: http://bjcardio.co.uk/2011/08/anaemia-treatment-in-chronic-heart-failure/
Equilibrium between the production and destruction of erythrocytes is important because an imbalance will cause problems within the body. Too few erythrocytes present will predispose to tissue hypoxia or a state where the tissues are deprived of oxygen. Too many erythrocytes change the blood viscosity, making it undesirably viscous. A mechanism is installed in the body that makes sure that erythrocytes in the blood will remain within the accepted range or homeostatic range. With this mechanism, more than 2 million new cells are produced every second in healthy people. The ongoing process is controlled by various hormones and is largely dependent on the availability of vital supplies like certain B vitamins, iron and amino acids. 
Hormonal ControlsErythropoiesis RegulationCredit: http://commons.wikimedia.org/wiki/File:Erythropoietin.png
A glycoprotein hormone in the form of erythropoietin provides the direct stimulus for the formation of erythrocytes. On normal circumstances, a small amount of erythropoietin continuously circulates in the blood all the time, contributing to the sustenance of red blood cell production at a basal rate. 
Although some of the erythropoietin is produced by the liver, the major organ that produces erythropoietin is the kidneys. The kidney cells are very reactive to the level of oxygen received. When kidney cells feel hypoxic or are receiving inadequate oxygen, they accelerate the release of erythropoietin.  
Three common factors contribute to the drop of normal blood oxygen levels which in turn triggers erythropoietin formation. One factor relating to the reduction in the number of circulating RBCs is due to bleeding or hemorrhage or the increased rate of destruction of RBCs. Iron deficiency can also cause a drop in normal blood oxygen levels as it reflects an insufficient amount of hemoglobin per RBC. Lastly, the physical absence or the amount of oxygen available is insufficient. 
Additional Key PointsErythropoiesis RequirementsCredit: http://www.rice.edu/~jenky/sports/epo.html
As what is already said, the kidney cells are very reactive to the level of oxygen. Hence, excessive oxygen within the bloodstream causes a depression of erythropoietin production. What is important to remember is that it’s not the actual number of erythrocytes found in the blood that influences the rate of erythropoiesis. It is oxygen, the ability of which to transport oxygen in order to meet the demands of the various tissues in the body.
 Erythropoiesis AnatomyCredit: http://www.helsinki.fi/~pjojala/Erythropoietin_EPO-hormone.htm
The erythropoietin that is present in the bloodstream has a different function and that is to stimulate the already committed cells that choose the specific path of becoming erythrocytes. The stimulation of this bloodborne erythropoietin causes the immature erythrocytes to mature more rapidly. A day or two after the levels of erythropoietin in the blood rises, there will be a marked increase in the rate of reticulocyte released. An important point to also consider is that hypoxia is not responsible for activating the bone marrow directly. Hypoxia has a rather indirect effect to the bone marrow but directly stimulates the kidneys to rapidly release erythropoietin which is the hormone that stimulates the bone marrow to start creating erythrocytes.