What is a reorder point?
The reorder point is the quantity on hand at which you should place a new purchase order. It is set so that the stock you still have lasts until the delivery arrives, with a safety buffer in case sales run faster or the supplier runs late.
Formulas
Demand during lead time = average daily usage × lead timeReorder point = demand during lead time + safety stock
Worked example
You use 40 units a day and deliveries take 7 days, so 280 units are used while you wait. Adding 100 units of safety stock gives a reorder point of 380 units.
How to use the reorder point calculator
- Enter your figures: average daily usage and lead time. Safety stock is optional and counts as zero when left empty.
- Read the result. It updates as you type, so there is no button to press.
- Try other numbers to compare scenarios. Reset brings back the example values.
Getting it right
- Base daily usage on recent sales, and recalculate before busy seasons when it will be higher.
- Lead time runs from the day you decide to order until the goods are on the shelf, including your own receiving time.
- With no safety stock you run short whenever demand during the wait is above average, which is about half the time. Leave it at zero only for items you can do without.
Frequently asked questions
How do you calculate the reorder point?
Multiply average daily usage by the lead time in days, then add safety stock. Forty units a day over a seven-day lead time with 100 units of safety stock gives 380.
How much safety stock should I hold?
A common rule is (maximum daily usage × maximum lead time) − (average daily usage × average lead time). The more variable your sales or supplier, the more you need.
What is the difference between reorder point and reorder quantity?
The reorder point tells you when to order. The reorder quantity tells you how much to order, and is often set with the economic order quantity formula.