Order too late and you run out, losing sales and customers; order too early and you tie up cash. The reorder point is the number that gets it right — the stock level at which you should place your next order. This guide gives the formula, a worked example, and how to use it.
What is a reorder point?
A reorder point is the inventory level that triggers a new order. When stock for an item falls to this level, you reorder — timed so fresh stock arrives just as you would otherwise run out. Set one per product and you never have to rely on memory.
The reorder point formula
Lead time is how long the supplier takes to deliver; safety stock is a buffer for demand spikes and delays — see safety stock.
A worked example
Suppose an item sells 8 units a day, your supplier takes 5 days to deliver, and you keep 15 units of safety stock.
- Demand during lead time = 8 × 5 = 40 units.
- Reorder point = 40 + 15 = 55 units.
When stock hits 55, you reorder — and new stock arrives before you run dry.
Why safety stock matters
Without a buffer, any spike in demand or supplier delay causes a stockout. Safety stock covers that uncertainty. Set it higher for unpredictable or fast-selling items, lower for steady, reliable ones — and don't overdo it, or you drift into overstocking.
Keep reorder points current
Sales rates and lead times change, so reorder points should be reviewed — a point set on last year's demand can be badly wrong. Watching turnover helps: see inventory turnover ratio.
Automate your reorder points
RushFlow tracks each item's sales rate and stock level and can alert you the moment an item hits its reorder point — across every branch — so you restock on time without watching shelves.