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How to Calculate Reorder Point

What is Reorder Point?

Calculates the inventory level at which to place a new order to avoid stockouts. Accounts for lead time and demand variability.

Formula

Formula: reorder point = (D × LT) + SS
D
D value — Variable used in the calculation
LT
LT value — Variable used in the calculation
SS
SS value — Variable used in the calculation

Step-by-Step Guide

  1. 1Average daily demand (D)
  2. 2Lead time in days (LT)
  3. 3Safety stock (SS)
  4. 4Formula: reorder point = (D × LT) + SS
  5. 5Reorder when inventory reaches this level

Worked Examples

Input
50/day use, 5day lead
Result
Order at 250

Common Mistakes to Avoid

  • Ignoring lead time variability
  • Not updating for seasonal demand changes

Frequently Asked Questions

Why is reorder point important?

Prevents stockouts by triggering orders in advance, accounting for lead time.

How does lead time affect reorder point?

Longer lead times require higher reorder points and more safety stock.

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