Reorder point formula: how to calculate when to restock

Jul 3, 2026·5 min read

Run out of stock and you lose the sale, and often the customer. Order too early and cash sits on a shelf as dead inventory. The reorder point is the line between the two: the stock level at which you place a new order so the goods arrive just before you would run out.

This guide walks through the formula, a worked example with real numbers, and the mistakes that make reorder points fail in practice.

The reorder point formula

Reorder point = (average daily sales × average lead time in days) + safety stock

In plain words: the amount you expect to sell while you wait for a delivery, plus a buffer for the days when sales spike or the supplier is late. When stock for a product drops to that number, you reorder.

Step 1: average daily sales

Take the units a product sold over the last 90 days and divide by 90. Use units, not revenue, and use real sales data rather than a guess. If the product is seasonal, base the average on the most recent period that resembles the months ahead, not on a full-year average that smooths the peaks away.

Step 2: average lead time

Lead time is the number of days between placing an order with your supplier and the stock sitting on your shelf, ready to sell. Count everything: supplier processing, shipping, customs, receiving, and labelling. Your last few purchase orders will give you the dates; average them.

Step 3: safety stock

Averages hide bad weeks. Safety stock covers the gap between a normal replenishment cycle and the worst realistic one:

Safety stock = (maximum daily sales × maximum lead time) − (average daily sales × average lead time)

A worked example

Say you sell phone cases. Your numbers for the last quarter look like this:

Safety stock = (15 × 10) − (10 × 7) = 150 − 70 = 80 units.

Reorder point = (10 × 7) + 80 = 150 units.

When stock hits 150 cases, you place a new order. In a normal cycle about 70 units sell before the delivery lands, and the 80-unit buffer stays untouched. If several cycles pass and the buffer never gets used, that is a signal you can trim it and free the cash.

Common mistakes

• One reorder point for everything. A bestseller with a two-week overseas lead time and a slow mover from a local supplier need very different numbers. Calculate per product.
• Set once, never revisited. Sales velocity and supplier lead times drift. Recalculate quarterly, and after any supplier change.
• Ignoring seasonality. A reorder point tuned to January will fail in December. Recheck your fast movers before peak season with peak-season sales numbers.
• Keeping it in your head or a spreadsheet. A reorder point only works if something actually tells you the moment stock crosses it.

Automate the alert, keep the judgment

The math is simple; the discipline is the hard part. Nobody rechecks a spreadsheet every morning. This is exactly what low-stock thresholds in inventory software are for: set the reorder point per product (and per location), and let the system flag the products that crossed it. In Invotory, the low-stock report and per-product thresholds do this out of the box, and a purchase order to the supplier is a click away when the alert fires.