Reorder point

The stock level that triggers a new order.

The reorder point is the stock level at which you place a new order. When on-hand quantity falls to this number, it is time to buy more.

The formula

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

If you use 10 units a day, lead time is five days, and safety stock is 40, the reorder point is 90 units. The first 50 units cover demand while the order is in transit; the 40 cover surprises.

Using it well

• Base it on real usage, not a guess.
• Recalculate when lead times change. A supplier slowdown should raise the reorder point.
• Alert at the point, not below it. By the time you are below it, you are late.

Work it out with the reorder point calculator.