Reorder Point Formula: Never Run Out of Stock Again
The reorder point tells you exactly when to place a new order. Here's the formula, how lead time and safety stock fit in, and a worked example.
What a reorder point is
The reorder point is the stock level that should trigger a new purchase order — low enough to avoid overstocking, high enough that you don't run out before the next delivery arrives. The free Reorder Point Calculator works it out instantly.
The formula
Reorder point = (average daily usage × lead time in days) + safety stock.
If you sell 40 units a day, your supplier takes 7 days to deliver, and you keep 50 units of safety stock, your reorder point is (40 × 7) + 50 = 330 units. When stock hits 330, you order.
Lead-time demand
Lead-time demand — usage multiplied by lead time — is the stock you'll consume while waiting for the order. Underestimate it and you stock out; overestimate and you tie up cash.
Safety stock
Safety stock is a buffer for demand spikes and supplier delays. More variability means you need more buffer. Set it deliberately rather than guessing.
Pair this with the Inventory Turnover Calculator to keep stock lean and available.
Use the free Reorder Point Calculator | Inventory Turnover Calculator