Reorder point formula, with worked examples (2026)
How to calculate a reorder point and safety stock for each item in a small shop, with worked numbers for steady sellers, unreliable suppliers and weekly ordering.
Key Takeaways
- The core formula is short. Reorder point = average daily sales × lead time in days + safety stock. Everything else in this guide is about getting those three inputs right.
- Use sales you can measure, not a guess. Divide units sold over the last 28 to 90 days by the number of days the item was actually in stock. Days it sat at zero hide demand rather than show its absence.
- Late deliveries cost more buffer than busy days. In the worked example below, adding two days of lead-time uncertainty almost doubles the safety stock. Track your suppliers’ real lead times, not the promised ones.
- Compare the reorder point with inventory position. Inventory position is stock on hand plus stock already on order, minus anything promised to customers. Comparing on-hand alone causes double orders.
- If you order on a fixed day, plan for the gap. Weekly ordering means you need cover for the lead time plus the week until your next order, so the formula changes to an order-up-to level.
Quick-Start Prioritization Framework
| Your situation | Method to use | Safety stock |
|---|---|---|
| Fewer than 50 items, steady sales | Daily sales × lead time + a few days’ buffer | Days of buffer × daily sales |
| Items where running out loses a customer | Same formula, buffer sized to a service level | z × standard deviation of daily sales × √lead time |
| Supplier often late | Statistical safety stock including lead-time variation | Use the combined formula in section 4 |
| You order on a fixed day each week | Order-up-to level covering lead time + review period | Sized over lead time + review period |
| Seasonal or brand-new items | Manual reorder point, reviewed monthly | Your judgement until you have 8+ weeks of sales |
A reorder point is the stock level at which you place the next order, so the new delivery arrives before the shelf runs empty. The basic formula fits on a sticky note, but the details decide whether it works: how you measure daily sales, which lead time you use, how much buffer you hold, and what to do when you only order once a week. This guide walks through each piece with real arithmetic, from a simple version you can set up this afternoon to the statistical version that sizes safety stock to a service level.
What a reorder point is, and what it is not
A reorder point is a trigger. When the stock of one item falls to that number, you order. It does not tell you how many to order; that is a separate decision covered later in this guide.
It works per item, and per variant if variants are stocked separately. A medium blue shirt and a large blue shirt sell at different speeds and each needs its own number.
The three inputs
Average daily sales: how many units leave the shelf on a typical day. Lead time: the days between placing an order and having the stock sellable on your shelf. Safety stock: extra units held in case sales run hot or the delivery runs late.
Shopify’s retail guide gives the same formula and an example: a shop selling 5 chairs a day with a 35-day lead time and 15 chairs of safety stock reorders at (5 × 35) + 15 = 190 chairs.
Why “sellable on the shelf” matters
Lead time is not just the supplier’s shipping estimate. Count the day you place the order, the supplier’s processing time, transit, and the time it takes you to check in, price and shelve the delivery. If deliveries sit in the back for a day before anyone unpacks them, that day belongs in the lead time.
Worked example 1: the simple version
Take a gift shop selling a lavender soy candle. Here is how to set its reorder point step by step.
Step 1: measure daily sales
Over the last 28 days the shop sold 168 candles and never ran out. 168 ÷ 28 = 6 candles a day.
If the candle had been out of stock for 4 of those days, you would divide by 24, not 28. Dividing by days in stock gives a truer picture of demand than dividing by calendar days.
Step 2: measure lead time
The supplier usually ships in 3 days, transit takes 5, and the shop needs a day to check in and price the delivery. Ordering happens on day 1. Lead time: 1 + 3 + 5 + 1 = 10 days.
Step 3: add a buffer
The owner decides three days of buffer is enough. Safety stock = 3 × 6 = 18 candles.
Step 4: put it together
Demand during the lead time is 6 × 10 = 60 candles. Reorder point = 60 + 18 = 78 candles. When stock reaches 78, order.
Sanity check: if the delivery arrives exactly on time and sales are average, about 18 candles remain on the shelf when it lands. If the delivery is three days late, you just about sell through. That is what the buffer buys you.
Sizing safety stock to a service level
Days of buffer is easy to explain but treats a steady seller and an erratic one the same way. The statistical version sizes the buffer to how variable sales actually are and to how often you are willing to run out during a reorder cycle.
The formula when lead time is reliable
Safety stock = z × σ × √L, where σ is the standard deviation of daily sales, L is lead time in days, and z is a number from the standard normal table that matches the service level you want. Common values: 1.28 for 90%, 1.65 for 95%, 2.33 for 99%.
Service level here means the share of reorder cycles in which you do not run out before the delivery arrives. 95% means roughly one stockout in every 20 orders.
Worked example 2
Back to the candle. Daily sales average 6, but in a spreadsheet the standard deviation of the last 28 days of daily sales (the STDEV.S function) comes out at 2.5. Lead time is 10 days, so √10 ≈ 3.16.
At 95%: 1.65 × 2.5 × 3.16 ≈ 13 candles of safety stock. Reorder point = 60 + 13 = 73.
- 90% service level: 1.28 × 2.5 × 3.16 ≈ 10, reorder point 70.
- 95% service level: 1.65 × 2.5 × 3.16 ≈ 13, reorder point 73.
- 99% service level: 2.33 × 2.5 × 3.16 ≈ 18, reorder point 78.
Choosing a service level
Going from 95% to 99% costs five more candles on the shelf, permanently. That is worth it for a best-seller that brings people into the shop, or an item where a stockout sends a customer to a competitor. It is rarely worth it for a slow-moving accessory.
A practical split for a small shop: 98 to 99% for the 20 or so items that drive most of your revenue, 95% for the middle, 90% for the long tail.
When the supplier is the unreliable part
Many small shops have steady demand and wobbly deliveries. The formula above assumes the lead time never changes. If it does, the buffer has to cover that too.
The combined formula
Safety stock = z × √(L × σd² + d² × σL²), where d is average daily sales, σd its standard deviation, L the average lead time and σL the standard deviation of lead time in days. This is the standard textbook form, and the one Wikipedia’s safety stock article gives.
Worked example 3
The candle supplier’s last ten deliveries took between 7 and 14 days, averaging 10 with a standard deviation of 2 days. Keep d = 6, σd = 2.5, z = 1.65.
Inside the square root: 10 × 2.5² = 62.5, plus 6² × 2² = 144. Total 206.5, and √206.5 ≈ 14.4. Safety stock = 1.65 × 14.4 ≈ 24 candles. Reorder point = 60 + 24 = 84.
Compare that with 13 candles when the lead time was fixed. Two days of delivery wobble nearly doubled the buffer. This is why the most valuable data you can collect is the real date each order arrived.
What to do with the result
Show the supplier the numbers. A supplier who can commit to a firmer delivery window saves you real money in stock you no longer need to hold. If they can’t, a second supplier for your top sellers may be cheaper than the extra buffer.
If you order on a fixed day: the order-up-to level
Many shops place orders on a set day, say every Monday, rather than the moment an item crosses its reorder point. That changes the maths, because after you skip ordering on Monday, the next chance is a week away.
Cover lead time plus the review period
Instead of a trigger, set a target: order-up-to level = d × (L + R) + safety stock, where R is the days between order dates. Safety stock is sized over L + R as well.
For the candle with weekly ordering: L + R = 10 + 7 = 17 days. Expected demand = 6 × 17 = 102. Safety stock at 95% with a fixed lead time = 1.65 × 2.5 × √17 ≈ 1.65 × 2.5 × 4.12 ≈ 17. Order-up-to level ≈ 119 candles.
How much to order each Monday
Order quantity = order-up-to level minus inventory position. If you have 45 candles on hand and 30 already on order, you order 119 − 75 = 44. If the result is zero or negative, skip the item this week.
How much to order: quantity, cases and minimums
The reorder point says when. The order quantity says how many, and it is usually shaped more by supplier rules than by formulas.
Economic order quantity, as a starting point
The classic economic order quantity formula balances the cost of placing an order against the cost of holding stock: EOQ = √(2 × D × K ÷ h), where D is annual demand, K the cost per order and h the yearly cost of holding one unit.
For the candle: D = 6 × 365 = 2,190. Suppose an order costs you $25 in shipping and time, and holding a candle for a year costs $2 in space, cash tied up and the risk it fades. EOQ = √(2 × 2,190 × 25 ÷ 2) = √54,750 ≈ 234 candles, roughly five to six weeks of sales. Both cost inputs here are illustrative; plug in your own.
Rounding to the real world
If candles come in cases of 12, round 234 up to 240. If the supplier has a $300 minimum order, group items from the same supplier so the order clears it. If a 10% discount kicks in at 300 units, check whether the saving beats the cost of holding the extra 60 for another week or two.
Keep it short for perishable or trendy stock
EOQ assumes an item sells at the same pace forever. For anything seasonal, dated or fashion-led, order smaller and more often even if each order costs more. Unsold stock at the end of a season usually costs far more than an extra delivery charge.
Keeping reorder points honest over time
A reorder point set in January will be wrong by July for most items. Plan for regular reviews from the start.
Recalculate on a schedule
Recalculate monthly from the last 4 to 13 weeks of sales, whichever window best reflects the season you are heading into. For strongly seasonal items, use the same weeks last year scaled by how this year is tracking.
Separate the suggestion from the value you use
Keep two numbers per item: the calculated reorder point and the one you actually apply. That lets you override for a promotion, a new product or a supplier holiday without losing the calculation.
Use inventory position, not just on-hand
Inventory position = on hand + on order − reserved for customers. If you compare the reorder point with on-hand stock only, you will reorder the same item again the next day because the first order hasn’t arrived yet.
Common mistakes
These come up in almost every shop that sets reorder points for the first time.
- Using the supplier’s quoted lead time instead of the real one measured from your own order and arrival dates.
- Dividing sales by calendar days that include stockouts, which understates demand for exactly the items that keep running out.
- One reorder point for an item with several variants, when each size or colour is stocked and sold separately.
- Setting the same days-of-buffer for every item, so erratic sellers run out and steady ones pile up.
- Ignoring stock already on order and placing duplicate orders.
- Never revisiting the numbers after a season, a price change or a new competitor down the street.
- Trusting a reorder point when the on-hand count itself is wrong. Regular cycle counts keep the input accurate.
Frequently Asked Questions
What is the reorder point formula?
Reorder point = average daily sales × lead time in days + safety stock. For example, selling 6 a day with a 10-day lead time and 18 units of safety stock gives a reorder point of 6 × 10 + 18 = 78.
How do I calculate safety stock?
The simple way is days of buffer × average daily sales. The statistical way is z × standard deviation of daily sales × √lead time, where z is 1.28, 1.65 or 2.33 for roughly 90%, 95% or 99% service levels. If lead time varies too, use z × √(L × σd² + d² × σL²).
What is the difference between a reorder point and a minimum stock level?
Many tools use “minimum” or “par level” for the same idea: the level that triggers a reorder. Some use minimum to mean safety stock, the level you never want to go below. Check what your tool means before entering numbers.
How often should I update reorder points?
Monthly is a sensible default for a small shop, plus whenever a supplier changes lead time, you change a price, or a season starts. Recalculate from recent sales rather than adjusting by feel.
What if I have no sales history for a new product?
Set a manual reorder point based on a similar item, order a small first batch, and switch to the formula once you have eight or more weeks of sales. Keep a close eye on it in the meantime.
Can software calculate reorder points for me?
Yes. Many inventory tools calculate or recommend them from your sales history. If you’d rather not do this yourself and no tool fits, an AI app builder such as Floot can build a small app that recalculates every item’s reorder point from your sales and emails you the list of items to order each morning.
Sources
- Shopify, Reorder Point Formula: A Retailer’s Guide, 2022 https://www.shopify.com/retail/reorder-point
- Wikipedia, Safety stock https://en.wikipedia.org/wiki/Safety_stock
- Wikipedia, Economic order quantity https://en.wikipedia.org/wiki/Economic_order_quantity