Reorder Point
The inventory level that triggers placing a new purchase order, calculated from lead time and average demand. Getting the reorder point wrong in either direction has a real cost - too low risks a stockout and lost sales, too high ties up cash that could be used elsewhere.
In practice
The formula is typically average daily sales multiplied by lead time in days, plus a safety stock buffer - set it too low and a business risks a stockout before the new order arrives; set it too high and cash sits tied up in inventory longer than necessary.
A product that sells 10 units a day with a 14-day supplier lead time gets a reorder point around 140 units, plus a buffer for demand spikes.
Why it matters
Getting the reorder point wrong in either direction has a real cost - too low risks a stockout and lost sales, too high ties up cash that could be used elsewhere.
Worth knowing
- Formula: (average daily demand x lead time in days) + a safety stock buffer.
- Should be recalculated periodically as demand patterns or supplier lead times change.
- Seasonal products often need a separately calculated reorder point ahead of their peak period.
Start the conversation
Let's talk it through
Tell us where things stand with putting reorder point into practice and we'll respond with next steps, no forms, no waiting in a queue.
- A specialist replies directly, not a support queue
- Whichever channel is fastest for you, call, WhatsApp or email
- No long-term contract to start the conversation
