What is a reorder point? Formula, example and common mistakes
The reorder point is the stock level that triggers a new purchase order. Learn the formula, see a worked example and avoid the mistakes that cause stockouts and overstock.
Stokrio Team · · 6 min read
A reorder point is the stock level at which you place a new order. Set it correctly and the delivery lands just as your buffer stock is being touched; set it too low and you run out while waiting, too high and you carry stock you do not need.
Key takeaways
- Reorder point = demand during lead time + safety stock.
- Compare it with inventory position (on hand + on order − committed), not on-hand alone.
- It must move with seasonality and trends; a fixed number goes stale.
- It tells you when to order, not how much. See EOQ and order rounding for quantity.
The formula
reorder point = (average daily demand × lead time) + safety stockWorked example
A product sells 20 a day. The supplier lead time is 21 days, so demand during lead time is 420 units. Safety stock is 145 units (see what is safety stock). The reorder point is 565 units.
Today you have 400 on hand and nothing on order. Your inventory position is 400, which is below 565, so you should order now. If you already had 300 on order, the position would be 700 and no new order is needed yet. Try it in the reorder point calculator.
Why a fixed reorder point fails
A reorder point set in spring is wrong by autumn if the product is seasonal, and wrong after a promotion changes the baseline. It is also wrong when the supplier's lead time drifts. A reorder point should be recalculated from current demand and measured lead times. We cover this in why static reorder points fail.
Continuous versus periodic review
The formula assumes you watch stock continuously and order the moment you hit the point. If you only review weekly, you must also cover the days until the next review, so the effective protection period is lead time plus review period. Many teams instead use an order-up-to level: at each review, order enough to bring the position up to a target.
Common mistakes
- Comparing with on-hand stock only. You reorder what is already on the way.
- Using quoted instead of actual lead time. Include receiving and putaway time.
- Forgetting committed stock. Stock reserved for orders is not available to sell.
- One rule for all products. Fast, erratic and slow items need different buffers.
How Stokrio handles it
Stokrio recalculates the reorder point from the forecast and measured supplier lead times, flags products at or below it, and drafts purchase orders rounded to MOQs and case packs. Details on the replenishment page.