The reorder point is the stock level at which a new order should be placed so that it arrives before the item runs out, calculated as average daily usage × supplier lead time in days + safety stock.
Reorder point (ROP)
Also called ROP, reorder level, reorder threshold ·
A reorder point is the quantity on hand at which you place your next order. Set it right and new stock arrives just as the old stock is running low; set it too low and you run out while waiting for the delivery; set it too high and cash sits on the shelf. It depends on three things: how fast the item sells, how long the supplier takes to deliver, and how much buffer you want for surprises.
The reorder point formula
| Input | What it means | Where to find it |
|---|---|---|
| Average daily usage | Units sold or used on a typical day | Units sold over the last 4–8 weeks ÷ trading days in that span |
| Lead time | Days from placing an order to having stock ready to sell | Your supplier’s recent deliveries, not their promise |
| Safety stock | Extra units held for surprises | A few days of usage, or a calculated buffer |
A worked example
A coffee shop goes through an average of 4 kg of beans a day. Its roaster delivers 5 days after an order is placed. The owner keeps 6 kg as safety stock, about a day and a half of usage, because deliveries have occasionally slipped.
- Expected usage during the lead time: 4 kg × 5 days = 20 kg.
- Add safety stock: 20 kg + 6 kg = 26 kg reorder point.
- When the stock count reaches 26 kg, the shop orders. If usage stays at 4 kg a day, about 6 kg will be left when the delivery arrives — the safety stock, untouched.
How much to order is a separate decision. The reorder point says when; the order quantity depends on storage space, shelf life, supplier minimums and how often you want to order. The same arithmetic applies whatever you count in — kilograms, bottles, boxes — and in any currency.
Why reorder points matter for a small business
Running out is expensive in ways that do not show on a report. A café without oat milk loses the sale and sometimes the regular; a salon out of its best-selling shampoo sends the customer to a pharmacy; a shop out of a phone charger loses the customer who came in for one thing. Ordering by feel tends to swing between running out and overbuying, and overbuying turns into dead stock that ties up the cash you need for the items that do sell.
A reorder point replaces a weekly guess with a rule anyone on the team can follow: when stock hits this number, order. It works best for items you sell steadily and reorder often, and it is worth setting for your top sellers first, since they cause the most lost sales when they run out.
Common mistakes
- Using the supplier’s quoted lead time. Use how long deliveries actually take, including the time to unpack and shelve.
- Forgetting how often you order. If you only place orders on Mondays, stock must also last until the next ordering day; add the days between orders to the lead time.
- Ignoring stock already on order. Compare the reorder point with stock on hand plus stock on order, or you will order twice.
- Never updating it. Usage changes with seasons, menu changes and promotions; review reorder points every month or two.
- Averaging over too short a period. One busy week makes daily usage look higher than it is; use several weeks of sales.
How it relates to other terms
Safety stock is the buffer built into every reorder point. Sell-through rate shows whether what you ordered is actually selling, and a reorder point set for an item that has stopped selling is how dead stock accumulates.
Questions
- How do you calculate a reorder point?
- Multiply average daily usage by the supplier’s lead time in days, then add safety stock. An item that sells 4 units a day with a 5-day lead time and 6 units of safety stock has a reorder point of 26 units.
- What is the difference between a reorder point and safety stock?
- Safety stock is the buffer held for surprises, while the reorder point is the stock level that triggers a new order. The reorder point includes the safety stock plus the stock expected to sell during the supplier’s lead time.
- Does a reorder point tell me how much to order?
- No. A reorder point tells you when to order; the order quantity is a separate decision based on how fast the item sells, storage space, shelf life, supplier minimums and how often you want to place orders.
- How often should reorder points be updated?
- Reorder points should be reviewed every month or two, and whenever sales patterns or supplier lead times change. Seasonal items may need a different reorder point for busy and quiet months.
- Can a reorder point be zero?
- A reorder point is only zero if the item can be replaced instantly and you accept running out. For most items, waiting until stock reaches zero means losing sales for the whole lead time.
Keep reading
- GlossarySafety stockSafety stock is the buffer that stops you running out when sales spike or deliveries slip. Three ways to calculate it, a worked example and common mistakes.
- Free toolReorder point calculatorFree reorder point calculator: enter daily sales, supplier lead time and safety stock — or worst-case figures — to know exactly when to reorder each item.
- GlossaryDead stockDead stock is inventory that has stopped selling and ties up your cash. How to measure it, a worked example, what causes it and how to clear it.
- GuideHow to track inventory for a small businessTrack inventory by recording every stock movement with a reason, counting on a schedule, and reordering at a calculated reorder point. Worked examples inside.
- FeatureInventoryFree, browser-based inventory software: stock that drops with every sale, adjustments with a reason, low-stock alerts and suggested reorder quantities.
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