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Join early accessReorder point
The stock level that should trigger a new purchase order.
The reorder point is the inventory level at which you should place a new order, so fresh stock arrives before you sell out. It covers expected demand during the supplier's lead time, plus a safety buffer for demand spikes and delays.
In practice
A reorder point turns purchasing from a memory exercise into a rule. Rather than periodically wondering what's getting low, each product carries a number: hit it, and the purchase order goes out. It's built from two things — what you'll sell during the lead time, plus safety stock for the weeks demand runs hotter or the supplier runs later than promised.
The lead time input is where reorder points usually break. Suppliers quote their good days, not their average ones, and the gap between a quoted four weeks and a real seven is precisely the gap where stockouts live. Use your observed lead times rather than the quoted ones, and recalculate when demand shifts — a reorder point set at last quarter's sales rate is wrong the moment a product takes off.
Formula
Reorder point = (Avg daily sales × Lead time) + Safety stock
Example: (20/day × 14 days) + 100 = 380 units.
What a good result depends on
Set so you rarely stock out but don't tie up excess cash in stock.
Common mistakes
- Setting safety stock to zero.
- Using lead times that don't reflect peak-season delays.
Questions people ask
- How do I calculate a reorder point?
- Multiply your average daily sales by your lead time in days, then add safety stock. Sell 12 a day with a 30-day lead time and 100 units of buffer, and you reorder at 460.
- How much safety stock should I add?
- Enough to absorb the variability you actually see — in both demand and supplier reliability. Products with erratic sales or unreliable suppliers need more; steady, quickly-replenished lines need very little.
- How often should I update it?
- Whenever sales rate or lead time meaningfully changes, and at minimum each season. Static reorder points are a common cause of stockouts on exactly the products that are doing well.