Average units sold per day.
Days from placing an order to receiving stock.
Buffer stock held against demand or lead-time variability.
Reorder Point
90
Place a new order when on-hand stock reaches this level.
Demand During Lead Time
70
Units expected to sell while you wait for the order.
Safety Stock
20
Buffer retained at the moment new stock arrives.
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The two components that make up your trigger, computed from the inputs above. Lead-time demand carries you through the supplier wait; safety stock is the cushion left when the order lands. Order the moment on-hand stock hits the total.
| Component | How it is found | Units |
|---|---|---|
| Demand during lead time | 10/day × 7 days | 70 |
| Safety stock buffer | Held against demand and lead-time variability | 20 |
| Reorder point ◀ | Lead-time demand + safety stock | 90 |
Multiply average daily demand by the supplier lead time to estimate how many units you will sell while the order is in transit.
A product sells about 10 units a day, the supplier takes 7 days to deliver, and you keep 20 units of safety stock.
Demand during lead time
10 × 7 = 70 units
Safety stock
20 units
Reorder point
70 + 20 = 90 units
When stock on hand falls to 90 units, place the next order. The 70 units cover sales during the 7-day wait and the 20-unit buffer absorbs surprises. A common mistake is leaving safety stock out, which sets the trigger at 70 and leaves no cushion if a shipment slips even one day.
The reorder point governs timing, not quantity. It is a trip-wire: the on-hand level at which a replenishment order must leave, so the next shipment lands before the shelf runs dry rather than after. How much you order is a separate decision, handled by order-quantity or economic-order-quantity logic.
Because it is a trigger rather than a target, the warehouse can be far fuller than the reorder point and that is fine. The number only matters at the moment stock falls to it. Treating it as a stock level to maintain, rather than a threshold to react to, is the most common conceptual error.
Average daily demand should come from a recent window that reflects current selling, not a quarter dominated by a one-off promotion or a stockout that suppressed sales. Take units sold over a representative stretch and divide by the days in it; refresh it as the trend moves so a growing product does not keep triggering on stale, low numbers.
Lead time is the full clock from raising the purchase order to having sellable stock on the shelf — supplier processing, transit, customs, receiving, and any inspection. Measure it from your own purchase history rather than the supplier’s optimistic quote, and if it swings, use the longer realistic figure here or push the variability into safety stock instead.
Set the point too low and the trigger fires late: the shipment arrives after demand has already drained the shelf, and every unit of unmet demand during the gap is a lost sale, plus the harder-to-see cost of a shopper who buys from a rival instead. A thin or missing safety-stock component is the usual culprit.
Set it too high and you reorder sooner than necessary, so average on-hand stock creeps up and with it the capital, storage, insurance, and obsolescence that carrying cost bundles together. The reorder point sits squarely on this trade-off; the aim is a threshold high enough to survive normal variability without permanently parking cash on the shelf.
This tool adds safety stock but does not size it — that is a deliberate division of labour. The buffer should be calculated separately from the variability of your demand and your lead time, because two products with identical average sales can need very different cushions if one has erratic demand or an unreliable supplier.
Feed a properly sized safety stock in and the reorder point inherits its protection automatically. Plug in a round guess and the trigger is only as trustworthy as that guess. When availability suddenly suffers despite an unchanged reorder point, the buffer is usually the parameter that has fallen out of date with reality.
Reorder points do not act alone. Together with order quantity they set how often you buy and how much you hold, which feeds straight into inventory turnover and days inventory outstanding — the metrics that measure how quickly stock converts back to cash. A higher trigger lifts average inventory and slows turnover; a leaner one speeds it but tightens the margin for error.
Read the reorder point as one lever in the working-capital system rather than an isolated rule. Tuning it changes your cash conversion cycle, so it deserves a place alongside coverage, turnover, and carrying-cost analysis rather than being set once and forgotten.
Stale demand is the silent failure: sales grow, the average is never refreshed, and the point keeps firing for a smaller business than the one you now run, so you order too late. A standing review whenever demand trends shift prevents it.
Two structural assumptions also catch sellers out. The formula uses a single supplier and one lead time, so split shipments or dual sourcing need separate treatment; and it leans on average demand, meaning a sharp spike inside the lead time can still empty the shelf if the buffer was sized for calmer conditions. Perishable or fast-obsolescing goods often need a different policy than a simple trigger altogether.
Multiply your average daily demand by the supplier lead time in days, then add your safety stock. For example, 10 units a day over a 7-day lead time is 70 units, and adding 20 units of safety stock gives a reorder point of 90 units.
Safety stock is the buffer you hold to cover surprises in demand or delivery. The reorder point is the broader trigger: it equals the demand expected during the lead time plus that safety-stock buffer. Safety stock is one input to the reorder point, not the same thing.
Yes. Without it, the trigger only covers average demand during the lead time, leaving nothing to absorb a busy week or a late shipment. Including safety stock is what protects you against running out during normal variability.
Take the units sold over a recent representative period and divide by the number of days. Selling 300 units in 30 days is an average of 10 units a day. Use a window that reflects current demand rather than an unusually slow or busy stretch.
Use the realistic time from placing an order to having sellable stock on the shelf, including supplier processing, transit, and any receiving or inspection. If lead times swing, use a longer figure or raise safety stock to stay protected.
It can. A higher trigger means you reorder sooner and tend to carry more stock, which raises carrying cost. The aim is a point high enough to avoid stockouts but not so high that capital sits idle on the shelf.
Review it whenever demand trends shift, a supplier changes its lead time, or you adjust your safety-stock policy. Seasonal businesses often recalculate before each peak so the trigger matches the demand they actually expect.
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
Business disclaimer
Results are estimates for planning and analysis based on the figures you enter. They are not accounting, tax, or financial advice — verify with your own records and a qualified professional before making decisions.
Built and maintained by Calculator Matters, an independent calculator project. Method checked against published formulas and primary sources · Last reviewed 5 June 2026 · How we calculate · Found an error? corrections@calculatormatters.com