Reorder Point
Also called: reorder level, ROP
What is Reorder Point?
The reorder point is the stock level at which a fresh order must be placed so that new stock arrives before the shelf runs empty. It combines demand during the supplier's lead time with a safety buffer.
Why Reorder Point matters
Ordering by memory produces both stockouts and overstock, often for the same items in different months. A reorder point turns purchasing into a rule rather than a recollection.
Reorder Point formula
Reorder point = (Average daily usage × Lead time in days) + Safety stock
Use realistic lead times, including the days an order sits before dispatch.
How Reorder Point works in practice
Set it per item from average daily usage, the supplier's realistic lead time, and a safety stock that reflects how variable both are. Review it seasonally rather than annually.
Worked example
Selling 12 units a day with a 5-day lead time and 20 units of safety stock gives a reorder point of 80.
Frequently asked questions
Increase safety stock rather than the reorder point calculation itself, and track actual lead times per supplier.