If you have ever sold out of your best SKU mid-week, or tied up cash in stock that just sits there, the cause is almost always a missing or stale reorder point. Get it right and reordering stops being a guess. You order the moment stock drops to a known number, and the next shipment lands just in time.
This guide gives you the formula, worked examples, and the safety-stock math that keeps you covered when demand spikes or a shipment runs late.
What is a reorder point?#
A reorder point (ROP) is the on-hand inventory level that should trigger a new order. Hit it, and you place a purchase order (or a transfer) so fresh stock arrives before you run out, not after.
The reorder point answers one question: at what stock level do I need to act so I do not run out before more arrives? Everything below is how to find that number.
The reorder point formula#
The core formula has two parts. The first is expected demand while you wait for the order, and the second is a buffer:
Where:
- ADS is average daily sales (units sold per day)
- LT is lead time in days (order placed to units sellable)
- SS is safety stock (your buffer for variability)
The first term, ADS × LT, is how much you expect to sell during the wait. Safety
stock is what protects you when reality does not match the average.
Why lead time is the part people get wrong#
Lead time is not just shipping time. It is the whole clock, from the moment you decide to reorder to the moment units are live and sellable:
| Stage | Typical time |
|---|---|
| PO approval & supplier processing | 2–5 days |
| Manufacturing | 1–4 weeks |
| Freight & customs | 1–5 weeks |
| Receiving & putaway (or FBA check-in) | 2–10 days |
Counting only the freight leg is the most common reason brands stock out "even though we ordered on time." Measure door to shelf, including the channel's check-in time. FBA inbound alone can add a week.
A worked example#
Say you sell BetterFocus capsules:
- You sell about 40 units/day (ADS = 40)
- Your full lead time is 30 days (LT = 30)
- You hold 5 days of safety stock, so 40 × 5 = 200 units (SS = 200)
Then:
ROP = (40 × 30) + 200
= 1,200 + 200
= 1,400 units
When on-hand stock for BetterFocus drops to 1,400 units, it is time to reorder. At a steady 40 a day you will sell roughly 1,200 during the 30-day wait, landing on your 200-unit buffer right as the new shipment arrives.
How to set safety stock#
Safety stock is where most of the judgment lives. There are two practical ways to set it.
The simple buffer. Hold a fixed number of days of average sales as a cushion, say 5 to 10 days. It is fast and good enough to start.
The statistical formula. Size the buffer to your actual variability:
- Z is the service-level factor (about 1.65 for 95% in-stock, 2.33 for 99%)
- σ is the standard deviation of daily sales
- √LT is the square root of lead time in days
The more your daily sales bounce around, or the longer and less reliable your lead time, the more safety stock you need.
- Statistical safety stock matches the buffer to real risk
- Higher service level for volatile or hero SKUs
- Less cash trapped in steady, predictable SKUs
- Needs clean daily sales history to compute σ
- Assumes lead time is reasonably stable
- Tedious to maintain by hand across dozens of SKUs
Every channel needs its own reorder point#
Here is the trap a single blended number hides. Your warehouse, Amazon FBA, and TikTok Shop each sell at different speeds and replenish on different timelines. A blended ROP will happily let your hottest channel run dry while another sits overstocked.
Calculate ADS, LT, and SS for each channel on its own. Amazon's climbing run
rate with a 10-day FBA inbound is a completely different reorder trigger than your
warehouse's slow supplier reorder.
See per-SKU, per-channel reorder points on your own catalog
Keeping reorder points current#
Reorder points drift. A SKU that sold 40 a day last month might sell 70 a day after a TikTok moment, and a 1,400-unit trigger is suddenly far too low. Recompute when:
- Run rate shifts up or down in a way that matters
- Lead times change (new supplier, freight delays, FBA congestion)
- You run a promo or expect a seasonal swing
This is the manual work Enough Stock removes. It watches live demand across every channel, recomputes each SKU's reorder point as the numbers move, and tells you what to order, how much, and by when, before you hit the line.
The bottom line#
Start with ROP = (average daily sales × lead time) + safety stock. Measure lead
time door to shelf, size safety stock to your variability, and compute it per
channel. Do that and reordering becomes a trigger you can trust instead of a fire
drill.