Reorder point formula: when to reorder, with a worked example

Short answer: reorder point = average daily sales × supplier lead time (in days) + safety stock. When stock on hand falls to that number, place the order.

The three numbers you need

Average daily usage (average daily sales, ADU):

Days of stock left (days of inventory remaining, stock cover):

Reorder point (reorder level):

Safety stock is the cushion for a late truck or a busy week. The simplest version is a few days of sales: safety stock = ADU × safety days.

A worked example

A distributor sold 1,200 cartons of a detergent in the last 30 days. The supplier takes 7 days to deliver, and the team wants 3 days of cushion.

At 520 cartons there are 13 days of stock — comfortably above the 7-day lead time, so no order yet. When stock falls to 400, order. If it ever drops to 280 cartons, only 7 days are left: the order must go today, because stock runs out the same day the delivery would arrive.

Why use both 30 and 90 days

A 30-day average reacts quickly to what’s selling now; a 90-day average smooths out one-off spikes. Compare them: if the 30-day figure is well above the 90-day one, demand is rising and your reorder point should rise with it. Before a seasonal peak, use last year’s demand for the same weeks instead of last month’s.

Common mistakes

• Setting min and max levels once and never revisiting them.
• Measuring demand from purchases instead of sales.
• Counting warehouse transfers or free samples as sales.
• Using the lead time the supplier promised instead of the one that actually happened.
• Trusting book stock that doesn’t match the shelf — fix that gap first.

Questions people ask