Reorder Point Formula: How to Calculate When to Reorder
Formulas · 8 min read
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The reorder point is the stock level at which you place the next order. Above it, wait; at or below it, order. It is the single most consequential number in day-to-day inventory work, and the formula fits on a napkin. The catch is not the arithmetic. The catch is that the inputs move and the napkin does not.
The formula
reorder point = (average daily demand × lead time in days) + safety stock
The first term is the stock you expect to sell while the replenishment order travels. The second is the buffer for non-average weeks, covered in depth in the safety stock guide. Together they answer: "if I order now, will I still be selling when it arrives?"
Worked example
A boutique sells 3 pairs of its core jeans a day. The supplier needs 21 days. Safety stock, computed at a 95 percent service level from the demand data, is 18 pairs.
reorder point = (3 × 21) + 18 = 63 + 18 = 81 pairs
When available stock (on hand plus already on order, minus reservations) touches 81, the next order goes out. How much to order is a separate question: enough to cover your planning horizon plus safety stock, minus what you will have left; our purchase order page walks the quantity math.
The three quiet failure modes
1. Stale inputs
The jeans start selling 5 a day after an influencer moment. The reorder point should now be
(5 × 21) + buffer ≈ 130, but the system still says 81, so the order goes out two
weeks late and the stockout arrives with receipts. Static
reorder points rot at the speed your demand changes. Whoever recomputes them, an analyst on a schedule or
software continuously, is your real inventory
system.
2. Counting on hand instead of available
Sixty units on the shelf, forty already promised to open orders: the honest number is twenty, and the reorder point should trigger on it. Multichannel sellers hit this hardest; it is half of what ecommerce inventory management means.
3. Believing the quoted lead time
The supplier says 14 days; the last six deliveries averaged 19. Use 19. Track quoted versus actual per supplier and feed the real number into both terms of the formula.
Reorder point vs. min-max
Min-max systems ("order up to 200 when stock hits 80") are reorder points with a fixed order-up-to level. They are fine for stable C items and wasteful for anything with a trend, because both numbers need the same maintenance the reorder point does. If you are going to maintain numbers, maintain the ones that follow demand.
Doing this for a thousand SKUs
The formula is trivial once. It is a job when it is per SKU, per location, monthly, with lead times per supplier and safety stock per service level. That maintenance burden, not the math, is why reorder automation exists as a category. Our live stock scan shows the automated version: paste rows, get verdicts with the reasoning attached, including the reorder quantities the formula implies.
See this math run itself
The free stock scan computes cover, safety stock and verdicts per SKU on sample data or rows you paste. No signup.
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