Reorder Point Calculator Formula
Understand the math behind the reorder point calculator. Each variable explained with a worked example.
Formulas Used
Reorder Point
reorder_point = (daily_demand * lead_time_days) + safety_stockLead Time Demand
lead_time_demand = daily_demand * lead_time_daysVariables
| Variable | Description | Default |
|---|---|---|
daily_demand | Average Daily Demand (units) | 40 |
lead_time_days | Lead Time (days) | 7 |
safety_stock | Safety Stock (units) | 50 |
How It Works
How to Calculate the Reorder Point
Formula
Reorder Point = (Daily Demand x Lead Time) + Safety Stock
The reorder point tells you exactly when to trigger a new purchase order. When inventory drops to this level, it is time to order. The lead time demand component covers expected usage during the wait for delivery. Safety stock provides a buffer against demand spikes or supplier delays. Setting the right reorder point prevents both stockouts and excess inventory.
Worked Example
A product sells 40 units per day, the supplier takes 7 days to deliver, and you maintain 50 units of safety stock.
- 01Lead Time Demand = 40 x 7 = 280 units
- 02Reorder Point = 280 + 50 = 330 units
- 03Place a new order when inventory hits 330 units.
Frequently Asked Questions
What happens if I set the reorder point too low?
You risk stockouts during the lead time period. If demand spikes or the supplier is late, you will run out of product, losing sales and potentially damaging customer relationships.
What happens if I set it too high?
You will carry more inventory than necessary, increasing holding costs and tying up cash. The goal is to balance stockout risk against carrying cost, which is why safety stock calculation is important.
Ready to run the numbers?
Open Reorder Point Calculator