How to set reorder points so you never run out of stock again
A reorder point is the stock level that should trigger a new order. Set it well and you reorder just in time — never scrambling after a stockout, never drowning in excess. Here’s how to calculate one without a supply-chain degree.
The simple formula
For any item:
Reorder point = (average daily usage × lead time in days) + safety stock
- Average daily usage — how many you sell or consume per day.
- Lead time — days between placing an order and it arriving.
- Safety stock — a buffer for demand spikes and late deliveries.
A worked example
You use about 8 units a day, your supplier takes 5 days, and you want a 2-day buffer: (8 × 5) + (8 × 2) = 56. When stock hits 56, it’s time to reorder.
Where to get your numbers
Average usage comes from your transaction history — which is exactly why tracking changes matters. Lead time comes from your order history with each supplier. Review both quarterly; demand and lead times drift.
Don’t rely on memory — automate it
A reorder point only helps if someone notices when you hit it. Set warning and critical levels per item so the system flags low stock for you, and build a reorder list in seconds instead of eyeballing shelves.