Reorder Point Formula: How to Calculate It

The reorder point tells you exactly when to place a new purchase order so stock arrives before you run out. It is one of the simplest and highest-impact calculations in inventory management.

The formula

Reorder Point = Lead Time Demand + Safety Stock

• Lead Time Demand — the units you typically sell during the days between placing an order and receiving it.
• Safety Stock — a buffer that protects against demand spikes and supplier delays.

Step 1 — Lead time demand

Multiply your average daily sales by the supplier's lead time in days.

Lead Time Demand = Average Daily Sales × Lead Time (days)

Example: you sell 20 units a day and your supplier takes 7 days to deliver. Lead time demand = 20 × 7 = 140 units.

Step 2 — Safety stock

A simple, conservative approach is the maximum-minus-average method:

Safety Stock = (Max Daily Sales × Max Lead Time)
              - (Avg Daily Sales × Avg Lead Time)

Example: max daily sales 30, max lead time 10 days, average daily sales 20, average lead time 7 days. Safety stock = (30 × 10) − (20 × 7) = 300 − 140 = 160 units.

Step 3 — Reorder point

Reorder Point = 140 + 160 = 300 units

When on-hand stock for that item drops to 300, place a new order.

Common mistakes

• Using the wrong unit of time (mixing weeks and days).
• Ignoring seasonality. Recalculate for peak periods.
• Setting safety stock to zero. Suppliers slip; demand spikes.
• Updating reorder points once a year instead of quarterly.

Automate it with Flowventory

Flowventory tracks every movement, computes lead time from your purchase order history, and raises a reorder alert the moment an item falls below its threshold. You can create a free account or contact us if you want a walkthrough.