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Reorder point formula, with a worked example

The formula takes one line. Getting the three inputs right is the entire job, and it is where nearly all the money is won or lost.

Last updated 7 August 2026.

The formula

The first term is the demand you expect while you wait for the delivery. The second is the buffer that stops an average from becoming a stockout. That is it.

Input 1: average daily sales

Units sold divided by days — but by days the product was in stock, not days on the calendar.

Use 30 to 90 days of history for a stable product. Use less if demand has genuinely shifted, and exclude discount periods, which measure price sensitivity rather than demand.

Input 2: lead time

The complete gap between placing an order and being able to sell the goods:

Lead time = order handling + production + transit + customs and inland + putaway

Two things are routinely left out. Production time for made-to-order goods, which for clothing is commonly 30 to 45 days and appears on no freight quote. And putaway, because goods sitting on a dock are not sellable. Both push the true lead time well past what the shipping estimate says.

Input 3: safety stock

Three formulas, in ascending order of honesty.

The simple one

Pick the buffer from how unreliable your supplier actually is. A week for a reliable domestic supplier; two to four weeks for ocean freight from Asia. Crude, but it beats zero by a wide margin.

The max-minus-average one

This covers the case where the worst demand week coincides with the worst supplier delay. It is generous, and for A-class products that is usually the right kind of wrong.

The statistical one

Note what the square root implies: doubling your lead time does not double the buffer you need, it multiplies it by about 1.41. Long lead times are less punishing than they feel, provided you order on time. Note also that 99% service costs nearly twice the buffer of 90%. That last point of availability is expensive, which is why service level should be an ABC decision rather than one global number.

A worked example

A store importing yoga mats from China.

• Sold 540 units in the last 90 days, in stock for 80 of them → 6.75 units/day
• Production 30 days + sea transit 45 + customs and inland 10 + putaway 2 → 87 days
• Supplier has been as late as 105 days; best week ran at 11 units/day

Demand during lead time: 6.75 × 87 = 587 units

Safety stock (max-minus-average): (11 × 105) − (6.75 × 87) = 1155 − 587 = 568 units

Reorder point: 587 + 568 = 1 155 units

Three reasons the textbook formula misleads importers

1. It ignores what is already on order. The classic formula compares stock on hand against a threshold. If a container is landing in three weeks, you do not need to order again. Any usable version compares stock on hand plus stock on order against the reorder point.
2. A stock level is the wrong interface for a long lead time. With an 87-day lead time you must act while the warehouse still holds six months of cover. Almost nobody looks at a healthy-looking product and thinks "order now". Converting the same maths into a deadline — days of stock − lead time − safety days — produces a countdown, which people act on.
3. It assumes one delivery speed. If you can also fly goods in, the real question is not "order or not" but "what fraction has to come fast". Miss the sea deadline and the honest answer is usually a small air bridge plus a normal sea order, not an all-air panic shipment.

How often to recalculate

Daily, if anything is automated. Sales rates drift, suppliers slip, and a deadline that passed yesterday cannot be recovered. Monthly recalculation on a 90-day lead time means acting on a picture that is up to a month stale, which is most of the buffer you were carefully computing.

Common questions

What is the reorder point formula?

Reorder point = (average daily sales x lead time in days) + safety stock. The first term covers demand while you wait for delivery; the second is a buffer for demand spikes and supplier delays.

How do I calculate safety stock?

The simplest version is average daily sales multiplied by a chosen number of buffer days. A more thorough version is (max daily sales x max lead time) minus (average daily sales x average lead time). The statistical version is Z x standard deviation of demand x the square root of lead time, where Z is 1.65 for a 95% service level.

Should the reorder point include stock already on order?

The reorder point itself is a threshold, but what you compare against it must be stock on hand plus stock already on order. Comparing only stock on hand causes repeat ordering of goods that are already in transit.

Why is my reorder point higher than my current stock?

Usually because the lead time is long. With an 87-day lead time and 6.75 units sold per day, the reorder point can be well over a thousand units, which can be several months of cover. It means you should already have ordered, and it is the normal situation for importers rather than an error.

How often should reorder points be recalculated?

Daily where it is automated. Sales rates and supplier lead times both drift, and with long lead times a missed deadline cannot be recovered without paying for faster freight.

Related guides

• Stock replenishment: the complete guide
• Inventory forecasting, without the mystique
• Sea, rail or air: freight planning for importers