How the reorder point is calculated

A reorder point is the inventory level at which you place a new order. Set it right and your restock arrives just as you are running low, so you never stock out and never tie up cash in excess inventory. The formula is:

Reorder point = (average daily usage x lead time) + safety stock

  • Average daily usage is how many units you sell or consume per day. Use the last 30 to 90 days for the most accurate number.
  • Lead time is how many days it takes from placing an order to receiving it, including shipping.
  • Safety stock is your buffer against demand spikes and supplier delays.

Two ways to set safety stock

The days of buffer method multiplies your daily usage by a number of buffer days. It is quick and works for most small businesses. The service level method sizes the buffer to how much your demand swings, using Z x standard deviation of daily demand x the square root of lead time, where Z is 1.65 for a 95% service level. Use it for your highest-value items, and especially when supplier lead times have become unpredictable.

For the full walkthrough with worked examples, read how to calculate reorder points and how much safety stock to hold. Setting up your catalog? Build product codes with the free SKU generator.

Do it automatically instead

Calculating this by hand for one product is easy. Doing it for hundreds, per location, and keeping it current as lead times move is not. Stockria stores a reorder point for every item and alerts you the moment stock hits it, then turns the alert into a purchase order in two clicks. Start free for up to 250 items, every feature included.

Frequently asked questions

What is the reorder point formula?

Reorder point = (average daily usage x lead time in days) + safety stock. When your stock drops to that number, place a new order so it arrives before you run out.

How do I calculate safety stock?

The simple method is average daily usage multiplied by the number of buffer days you want (3 to 5 days for steady items, more for unpredictable ones). The service-level method uses Z x standard deviation of daily demand x the square root of lead time, where Z is 1.65 for a 95% service level.

Is this reorder point calculator free?

Yes, completely free with no signup. If you want Stockria to calculate a reorder point for every item automatically and alert you when stock hits it, the free plan covers up to 250 items.

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