How to calculate your reorder point
Your best seller ran out, and the supplier needs a week to send the order. A whole week of lost sales and apologies to customers. The reorder point tells you when to order, so new stock arrives before what you have runs out.
The formula
Reorder point = average daily sales × lead time in days + safety stock. The first part is what you will sell while you wait for the order. The second is a buffer for days when sales rise or the supplier is late.
You sell 40 units a day on average, the lead time is 7 days, and safety stock is 100 units.
What you will sell while waiting = 40 × 7 = 280 units.
Reorder point = 280 + 100 = 380 units.
When your stock falls to 380 units, send a new order.
How much safety stock?
If you are not sure, use the worst you have seen. Say your highest daily sales were 60 units and your longest lead time was 10 days. The worst case = 60 × 10 = 600 units, and the usual case is 280. The difference, 320 units, is the safety stock that covers the worst you have seen. This is a simple rule, not a statistical service-level calculation.
How to do it
- Open the Inventory reorder-point calculator and enter how many units of the product you sell on an average day.
- Enter the lead time: the days from sending the order to your supplier until the goods are ready to sell.
- Enter your safety stock, or choose to derive it from your highest daily sales and longest lead time.
- Read the reorder point and its parts.
Before you rely on the number
- The tool assumes steady daily sales and a fixed lead time, and does not account for seasons or promotions.
- Compare the point with your current stock plus anything ordered and not yet received. The tool does not know your stock.
- It does not work out the ideal order quantity, supplier minimums or storage costs.
- One product at a time. Recalculate when sales or the supplier change.
When you reach the point, prepare the purchase order for your supplier with the Purchase-order generator.
Common questions
Do I count lead time from the order date or the shipping date?
From the day you send the order to the supplier until the goods are ready to sell at your end, including shipping and receiving.
What if my sales are seasonal?
Work out a separate point for each season using that season's average sales, because the tool assumes steady sales.
Is my data saved?
No, the calculation runs inside your browser.