What is a reorder point?
The reorder point (ROP) is the stock level that triggers a replenishment order. When stock for a product falls to this level, you order more, so the new delivery arrives just as the remaining stock runs low. Set it too low and you run out; set it too high and you hold more stock than you need.
Core principle: Reorder point = what you will sell while you wait for the delivery + a buffer for surprises.
Reorder point formula
ROP = average daily sales × lead time in days + safety stock
The lead time should cover the whole time from placing the order to having stock available to pick: supplier production, freight, customs clearance and receiving.
Example: A homeware brand sells 30 units of a lamp per day. From order to stock on the shelf takes 20 days, and it keeps 150 units of safety stock. ROP = 30 × 20 + 150 = 750 units. When stock falls to 750, the brand orders the next batch.
Key inputs
Average daily sales
Based on recent sales per SKU, adjusted for trends, promotions and seasons.
Lead time
Supplier, freight, customs and receiving time combined.
Watch out for: Receiving time at the warehouse is often forgotten. A dock-to-stock time of two days adds two days of sales to the reorder point.
Safety stock
The buffer against higher demand or delays.
Reorder point vs reorder quantity
| Reorder point | Reorder quantity | |
|---|---|---|
| Question it answers | When to order | How much to order |
| Based on | Demand during lead time and safety stock | Order costs, holding costs, supplier minimums, freight (for example full pallets or containers) |
Using reorder points in eCommerce
- Set a reorder point per SKU and per warehouse if you hold stock in several countries.
- Let your inventory system or WMS alert you, or create purchase orders, when stock reaches the reorder point.
- Recalculate before peak season and whenever lead times change, for example when sea freight is slower.
- Remove discontinued products from automatic reordering to avoid dead stock.
Frequently asked questions
What is a reorder point?
The stock level at which you order more, so the new delivery arrives before you run out.
How do you calculate the reorder point?
Multiply average daily sales by the lead time in days and add safety stock.
What lead time should I use?
The full time from placing the order until the stock can be picked: production, freight, customs clearance and warehouse receiving.
How often should reorder points be updated?
At least every quarter, before peak season and whenever demand or lead times change noticeably.
