Reorder point formula
Reorder point = lead time demand + safety stock.
Lead time demand is the stock you expect to use while waiting for a supplier order to arrive.
Lead time demand = average daily usage x supplier lead time in days.
Inventory guide
How to calculate reorder point
Reorder point tells you when to place the next order before stock runs out. It combines average usage, supplier lead time, and safety stock.
Example calculation
A shop sells or uses 18 units per day. Supplier lead time is 7 days. The owner wants 5 days of safety stock.
- Lead time demand: 18 x 7 = 126 units.
- Safety stock: 18 x 5 = 90 units.
- Reorder point: 126 + 90 = 216 units.
When stock falls to 216 units, it is time to reorder.
What safety stock means
Safety stock protects against real-world variation: late deliveries, sudden sales spikes, damaged stock, counting errors, or seasonal demand.
Small businesses should review safety stock often. A fixed buffer can become too low when demand grows or too high when demand slows.
Common mistakes
- Using guesswork instead of average daily usage.
- Ignoring supplier lead time.
- Setting one reorder point for every item.
- Forgetting seasonal demand changes.
- Not updating reorder points after sales patterns shift.
Use a calculator
The StockMitra stock cover planner helps estimate days of cover and reorder timing from current stock, daily usage, and buffer days.
How StockMitra helps
StockMitra is being built to keep reorder signals connected to item records, movement history, and practical business workflows.
Frequently asked questions
What is the reorder point formula?
Reorder point = lead time demand + safety stock. Lead time demand = average daily usage × supplier lead time in days. Add safety stock to protect against demand spikes or delayed deliveries.
What is safety stock in inventory management?
Safety stock is a buffer of extra units held to protect against real-world variation such as late deliveries, sudden sales spikes, damaged stock, counting errors, or seasonal demand changes. It is calculated as average daily usage × buffer days.
How do I calculate lead time demand?
Lead time demand = average daily usage × supplier lead time in days. For example, if you use 18 units per day and your supplier takes 7 days to deliver, lead time demand is 126 units. This is the stock consumed while waiting for an order to arrive.
What are common mistakes when setting a reorder point?
Common mistakes include ignoring safety stock entirely, using total stock instead of daily usage, not updating the reorder point when supplier lead time changes, and applying the same buffer to all items regardless of how critical they are.