Find the stock level at which you should reorder a product so new stock arrives before you run out, based on daily sales, supplier lead time and safety stock.
How the reorder point works
The reorder point is the stock level that triggers a new order. It covers expected sales during the supplier's lead time, plus a safety buffer for surprises.
Reorder point = average daily sales × lead time (days) + safety stock
Worked example
You sell an average of 40 units a day, your supplier takes 7 days to deliver, and you keep 100 units of safety stock. The reorder point is 40 × 7 + 100 = 380 units. When stock falls to 380, place your order.
Setting safety stock
A simple method uses your worst cases:
Safety stock = (max daily sales × max lead time) − (average daily sales × average lead time)
If you sometimes sell 55 a day and delivery can take 9 days, safety stock would be 55 × 9 − 40 × 7 = 215 units. More advanced methods use the statistical variation in demand and lead time.
Tips
- Review reorder points for seasonal products before peak periods.
- Combine with the economic order quantity to decide how much to order.
- Track stock-outs: frequent ones mean safety stock is too low.
Frequently asked questions
Should lead time include processing time?
Yes. Count everything from placing the order until the stock is on your shelf and ready to sell.
What if sales are very unpredictable?
Keep more safety stock or review stock levels more often.
Related tools
Results are estimates for planning and education. They are not accounting, tax or legal advice. Check important figures with a qualified accountant.