Reorder Point Calculator

Understanding Reorder Points

The reorder point is the inventory level at which you should place a new order. It ensures you'll have enough stock to cover demand during the lead time, plus a safety buffer.

What is a Reorder Point?

Your reorder point tells you: "When inventory drops to this level, place an order immediately." It's calculated to cover your expected usage during delivery time, plus your safety stock buffer.

Why Reorder Points Matter

• Automatic Triggers: Create clear rules for when to order more inventory
• Avoid Stockouts: Ensure you never run out of critical items
• Optimize Cash Flow: Don't order too early (tying up cash) or too late (risking stockouts)
• Simplify Operations: Remove guesswork from inventory management
• Scale Your Business: Systematic ordering as you grow

The Formula Explained

Your reorder point has two components:

• Lead Time Demand: How much you'll sell during the delivery period (Average Daily Usage × Average Lead Time)
• Safety Stock: Your protective buffer for unexpected demand or delays
• Total Reorder Point: When inventory hits this level, place your order

Example Scenario

E-commerce Store:

• Average daily sales: 10 units
• Average lead time: 7 days
• Safety stock: 35 units (from worst-case scenarios)
• Lead Time Demand: 10 × 7 = 70 units
• Reorder Point: 70 + 35 = 105 units
• Action: When inventory drops to 105 units, place a new order

What Happens After You Order?

Understanding the flow helps clarify why the reorder point matters:

• You place an order when inventory hits 105 units
• During the 7-day lead time, you sell about 70 units (10/day × 7 days)
• When the order arrives, you're down to 35 units (your safety stock)
• If demand spikes or delivery delays occur, your safety stock protects you

Optimizing Your Reorder Point

• Track Actual Usage: Update average daily usage based on real sales data
• Monitor Lead Times: Adjust if your supplier's delivery times change
• Recalculate Safety Stock: Use the Safety Stock Calculator to keep it current
• Review Seasonality: Increase reorder points before peak seasons
• Set Up Alerts: Use inventory software to notify you when reorder point is reached

Common Mistakes to Avoid

• Ignoring Safety Stock: Reorder point without safety stock = high risk of stockouts
• Using Old Data: Outdated usage rates lead to incorrect reorder points
• Forgetting Lead Time: Not all lead times are equal - account for your specific supplier
• Set and Forget: Review reorder points quarterly or when business conditions change

Related Tools

First time calculating reorder points? Start with the Safety Stock Calculator to determine your buffer inventory, then return here to calculate your reorder point.