The reorder point formula
Reorder point = (average daily demand × lead time in days) + safety stock
The first part is the stock you expect to sell while you wait for the delivery. Safety stock covers what you cannot expect: a busy week, or a supplier who is two days late. Without it you would run out in roughly half of your order cycles, because actual demand lands above the average about half the time.
Worked example
A product sells 25 units a day and the supplier takes 14 days to deliver. The business keeps 60 units of safety stock.
- Expected sales during the lead time: 25 × 14 = 350 units.
- Reorder point: 350 + 60 = 410 units.
- With 500 units in stock and nothing on order, the business reaches the reorder point in about 3.6 days.
Without safety stock the reorder point would be 350, and if sales over those 14 days ran even slightly above average, the shelf would empty before the delivery arrived.
Compare it with your stock position, not just what is on the shelf
Check the reorder point against stock on hand plus anything already ordered but not yet received. Looking only at the shelf leads to a second order while the first is still on the truck, and a surplus when both arrive.
Signs your reorder point needs updating
- You keep running out just before deliveries arrive. Demand has grown or lead times have stretched; recalculate both.
- Stock piles up after every delivery. Demand has slowed, or safety stock is set higher than you need.
- The supplier changed. A new lead time means a new reorder point, even if demand is the same.
Frequently asked questions
What is a reorder point?
The reorder point is the inventory level at which you place a new order. It equals the demand you expect during the supplier's lead time plus your safety stock.
How do I calculate a reorder point without safety stock?
Multiply average daily demand by the lead time in days. Bear in mind that this assumes demand and delivery times never vary, so you will run short in roughly half of your order cycles.
What is the difference between the reorder point and the reorder quantity?
The reorder point tells you when to order; the reorder quantity tells you how much. A common way to set the quantity is the economic order quantity (EOQ).
Should stock already on order count towards the reorder point?
Compare the reorder point with your inventory position: stock on hand plus open orders, minus anything already promised to customers. Otherwise you will place duplicate orders.
How do I find my supplier lead time?
Look at your last 10 to 20 orders and count the days from placing each one to having the stock ready to sell, including receiving and putting away. Use the average, and its standard deviation for safety stock.
Last reviewed 2026-10-17.