Reorder too late and you sell out. Reorder too early and your cash sits on a shelf. A reorder point tells you exactly when to place the next order. Here's how to calculate one.
Three numbers
The formula is simple. Take your average daily sales, multiply by your supplier's lead time in days, and add your safety stock. When inventory drops to that number, it's time to reorder.
- Daily sales: Average units sold per day
- Lead time: Days from order to delivery
- Safety stock: A buffer for surprises
- Reorder point: (Daily sales × lead time) + safety stock
Work it through
Here's an example. You sell four units a day, and your supplier takes fourteen days. That's fifty-six units sold while you wait. Add a safety stock of twenty, and your reorder point is seventy-six units.
- Daily sales: 4 units
- Lead time: 14 days → 56 units
- Safety stock: 20 units
- Reorder at: 76 units
How much buffer?
Safety stock covers two risks: a busier week than usual, and a late delivery. A simple starting point is a few extra days of sales. Use more for products with uneven demand, or an unreliable supplier.
- Covers: A sales spike or a late shipment
- Start with: A few extra days of sales
- Use more: Uneven demand or slow suppliers
The numbers move
The catch is that these numbers change. Sales trend up or down, and seasons shift demand. A reorder point you set in spring can be wrong by summer, so recalculate it regularly, for every product.
| Spring | Summer |
|---|---|
| 4 a day → reorder at 76 | 9 a day → reorder at 146, with the same buffer |
Want the number without the arithmetic? Use the free reorder point calculator.
Doing this at scale
StockSense does the math for every product. It forecasts demand from your order history, using velocity, trend, and seasonality, recommends a reorder quantity and date for each one, and drafts purchase orders grouped by supplier. See StockSense.