Reorder Point
Also known as: ROP, reorder level
The inventory level that triggers a new purchase order, calculated so replenishment arrives before you sell out.
The reorder point is the inventory level that triggers a new purchase order. When stock on hand drops to this number, it is time to reorder — so that replenishment arrives before your remaining units, plus any safety stock, run out.
The formula is: Reorder Point = (Average Daily Sales × Supplier Lead Time in Days) + Safety Stock. Each variable does a specific job: average daily sales estimates how fast stock will drain while the order is in transit; lead time is how many days that transit takes; safety stock is the buffer you add to cover demand or delivery surprises.
A worked example: a product sells 20 units per day, your supplier takes 8 days to deliver, and you want 40 units of safety stock. Your reorder point is (20 × 8) + 40 = 200 units. When on-hand stock drops to 200, place the order. By the time it arrives in 8 days you will have sold roughly 160 units and have 40 left as your buffer.
Reorder points are not set-and-forget. If demand shifts seasonally, if a supplier's lead time changes, or if you adjust your safety stock target, the reorder point needs to move with it. A quarterly review of each product's inputs is a sensible minimum; a stockout or a large overstock is always a signal to revisit immediately.
Setting reorder points per SKU turns restocking from a reactive scramble into an automatic rule. Inventory software can watch every product and flag or auto-generate a purchase order the moment stock hits its threshold — eliminating the human lag that most stockouts live in.
Put it into practice
Frequently asked questions
- What is the reorder point formula?
- Reorder Point = (Average Daily Sales x Supplier Lead Time in Days) + Safety Stock. For example, if a product sells 20 units per day, takes 8 days to arrive, and you keep 40 units of safety stock, your ROP is (20 x 8) + 40 = 200 units.
- What happens when inventory reaches the reorder point?
- You place a new purchase order. The reorder point is set so that by the time the order arrives, you still have enough stock left to cover demand during the lead time, including your safety stock buffer. Missing the trigger leads to a stockout.
- How often should I recalculate my reorder points?
- Quarterly is a reasonable default. Recalculate immediately if demand shifts seasonally, your supplier's lead time changes, or you experience an unexpected stockout or overstock on the product.
- What is the difference between reorder point and safety stock?
- Safety stock is the minimum buffer below which you never want to drop. The reorder point is the level at which you place the next order to ensure replenishment arrives before safety stock is consumed. The two are linked: ROP includes safety stock in its formula.
Related terms
- Safety StockExtra inventory held as a buffer against demand spikes and supplier delays so you do not run out.
- Lead TimeThe total time between placing a purchase order and having that stock available to sell.
- StockoutWhen inventory hits zero and demand cannot be fulfilled — causing lost sales, customer frustration, and often a permanent switch to a competitor.
- Purchase Order (PO)A formal document a buyer sends a supplier to order goods at agreed quantities and prices.
Run it in one system
VNDLY tracks stock, orders, and suppliers together so terms like this stop being theory and start being automatic.