A reorder point is the stock level that should trigger a new order — calculated from your average daily sales multiplied by lead time, plus a safety buffer. Set it too low and you run out; set it too high and you tie up cash in excess stock.
A reorder point is the stock level at which you should place a new order, calculated so the order arrives before you actually run out.
The basic formula
Reorder point = (average daily sales × lead time in days) + safety stock. If you sell 5 units a day, your supplier takes 7 days to deliver, and you want a 2-day buffer for demand spikes or delivery delays, your reorder point is (5 × 7) + (5 × 2) = 45 units.
Why a flat number per item is risky
A rule like "reorder every item at 10 units" ignores that different items sell at very different rates and have very different lead times. A fast-moving item with a long lead time needs a much higher reorder point than a slow-moving item with next-day delivery — using the same number for both means one is over-stocked and the other is at real risk of running out.
Accounting for lead time variability
If a supplier's delivery time varies — sometimes 5 days, sometimes 10 — your safety stock needs to cover the worse case some of the time, not just the average. This is where a lot of manual reorder-point math falls short: it's calculated once, from an optimistic lead time, and never revisited when a supplier starts running late.
Revisiting reorder points
Sales velocity changes — seasonally, with promotions, or as a product's popularity shifts. A reorder point calculated a year ago on last year's sales data is a guess, not a plan. Reorder points that recalculate from recent sell-through, rather than a number set once and forgotten, stay accurate as your business changes.
StashBill's inventory intelligence recalculates reorder points from recent sell-through automatically, rather than a number set once and forgotten.Frequently asked
What if I don't know my exact lead time?
Use your worst realistic case, not your average — a reorder point sized for the average lead time will occasionally run out when a delivery is late.
Should every item have a reorder point?
It's most useful for items where running out actually costs you a sale; very low-value or rarely-purchased items may not need the same rigor (see ABC/XYZ analysis).