The short answer: reorder point = average daily sales × supplier lead time (days) + safety stock. When your stock of an item falls to that number, place the order. The delivery then arrives just as you reach your safety stock, instead of after you’ve sold out.
A worked example
Example numbers: you sell 4 of an item a day. Your supplier takes 7 days to deliver. You like to keep 10 spare in case of a busy week.
Reorder point = 4 × 7 + 10 = 38. When you’re down to 38, reorder. Over the next 7 days you sell about 28, the delivery lands, and you still have about 10 on the shelf.
Choosing your safety stock
Safety stock covers the days that don’t go to plan — a busy Saturday, a late delivery. A simple starting point is a few days of normal sales for steady items and more for items with unpredictable demand or unreliable suppliers. Review it after a few months of real sales.
Start with your top 20
You don’t need a reorder point for every product on day one. Set them for your top 20 sellers first — that’s where running out costs you most — then work down the list.
Related: avoid stock-outs · inventory management.