A reorder point is the on-hand count at which you have to place an order today to have stock on the shelf before you run out. It's one number per product, it comes from three inputs you already have, and getting it right is most of what keeps a store from selling out of its bestsellers while sitting on dead stock.
The formula
Daily sales is your average over a typical stretch, not your best week. Lead time is the days from placing the order to stock on the shelf, including the supplier's processing time, not just transit.
Read it as a sentence: while you wait for the order, you'll keep selling at your daily pace for the whole lead time, and you want a cushion on top of that in case the truck is late or a week runs hot. When on hand plus anything already on order drops to that number, order.
A worked example
A store sells a heavyweight tee. It moves 42 a week, the supplier takes three weeks door to door, and the owner wants a week of cushion.
- Weekly sales
- 42 units
- Daily sales
- 42 ÷ 7 = 6 units a day
- Lead time
- 21 days
- Safety stock
- 7 days × 6 a day = 42 units
- Reorder point
- 6 × 21 + 42 = 168 units
With 38 on hand, this SKU is already 130 units past its reorder point. It'll run out in about six days and the next order can't land for three weeks.
How to set safety stock
Safety stock is the part of the formula people guess at. Sizing it in days of cover is easier to reason about than sizing it in units, and it scales with how fast the product sells.
- Steady seller, reliable supplier: a third to a half of the lead time. A 21-day lead time gets 7 to 10 days of cushion.
- Volatile seller, or a single supplier with no backup: the full lead time. If they're late by a week, you're covered for a week.
- Seasonal peak coming: add the expected lift. If December sells double, double the daily rate you use for those weeks.
- Cheap and small: round up. The cost of one more case is nothing next to a week of zero sales on a bestseller.
Safety stock in units is then simply daily sales × safety days. It's the one input worth revisiting every quarter.
How much to order once you hit it
The reorder point says when. It says nothing about how much. A common mistake is to order the same case every time, which either ties up cash or leaves you re-ordering every week.
Order cycle is how often you place orders with this supplier. Every order has to carry you through the wait, the cushion, and the gap until you order again.
- Days to cover
- 21 lead + 7 safety + 14 cycle = 42 days
- Units needed
- 6 a day × 42 = 252 units
- Already have
- 38 on hand, 0 on order
- Order
- 252 − 38 = 214, rounded up to the 24-unit case pack: 216 units
Days of cover, the number to watch weekly
Sort your catalog by this once a week. The top of the list is what runs out first; anything past 90 days is cash sitting on a shelf.
Do it for every SKU
- Export a sales report by SKU for the last eight to twelve weeks from your store or register, and divide each SKU's units by the number of weeks for its weekly average.
- Write down each supplier's real lead time in days, from the day you send the order to the day it's on the shelf. Ask them if you don't know; then add a couple of days.
- Pick safety days per SKU using the rules above: a third to a half of lead time for steady products, the full lead time for volatile ones.
- Note your case pack and how often you order from that supplier.
- Put every SKU into the reorder planner, or into the CSV template below, and sort by days of cover. The top rows are this week's orders.
Questions people ask
What is the reorder point formula?
Reorder point equals daily sales multiplied by lead time in days, plus safety stock in units. When your on-hand count, plus anything already on order, falls to that level, it's time to place the order.
How do you calculate safety stock?
The practical way is in days of cover: choose how many days of cushion you want, then multiply by daily sales. A third to a half of the lead time suits steady products with a reliable supplier; the full lead time suits volatile products or a single supplier with no backup.
What is the difference between reorder point and reorder quantity?
The reorder point is when to order: the on-hand level that triggers it. The reorder quantity is how much: enough to cover lead time, safety stock, and the gap until your next order, minus what you already have, rounded up to the case pack.
Does the reorder point include stock that is already on order?
Compare the reorder point against on hand plus on order. Stock that's already coming is cover, as long as it lands before the shelf empties. If it won't, you have a gap to bridge, not a reason to relax.