Reorder point calculator

How the reorder point formula works

Reorder Point = (Lead Time × Daily Demand) + Safety Stock. Multiply the number of days it takes to receive an order by your average daily sales to get the demand you expect during the lead time, then add a safety-stock buffer. When inventory drops to that level, place a new order.

Lead time is the number of days between placing an order and receiving it — include shipping, supplier processing, and any buffer you know you need. Daily demand is the average number of units sold or used per day, calculated from real historical sales rather than a guess.

Safety stock is the extra inventory you hold to absorb demand spikes and supplier delays. It is the one lever you tune per item: hold more for critical or high-margin SKUs where a stockout is expensive, and lean leaner on low-value items that are easy to replace.

A worked example

Say an item takes 7 days to arrive, sells 20 units a day, and you want 50 units of safety stock. The demand during lead time is 7 × 20 = 140 units. Add the 50-unit buffer and the reorder point is (7 × 20) + 50 = 190 units.

So when inventory drops to 190 units, you place a new order. That leaves enough stock to cover the 7-day lead time (140 units) plus 50 units of safety stock for unexpected demand — the order arrives before you run dry, and the buffer covers you if it is late or demand jumps.

Tips for setting reorder points

Use actual data. Base daily demand on real sales history, not estimates, and account for seasonality if demand varies across the year.

Pad your lead time. Suppliers are sometimes late — use worst-case lead time for critical items and average lead time for the rest.

Adjust safety stock by importance. High-margin or critical items deserve more safety stock; low-value items can run leaner.

Review regularly. Demand and lead times drift, so revisit reorder points at least quarterly, and any time you see a sustained shift or a seasonal peak coming.