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Reorder Point Formula: How to Never Run Out of Your Best Sellers

By Quantum Solutions · 2 min read

Short answer: reorder point = (average daily sales x lead time in days) + safety stock. Lead time is how many days pass between ordering and having stock on the shelf. When stock reaches the reorder point, order. Set it per product, not one number for the whole shop.

Key takeaways

  • Reorder point = average daily sales x lead time + safety stock.
  • Safety stock protects you when sales spike or deliveries are late.
  • Fast movers with slow suppliers need the highest minimums.
  • Review the numbers every few months, because sales and lead times change.

A worked example

You sell about 12 packs of rolled oats a day. Your supplier takes 4 days to deliver.

  • Demand during lead time = 12 x 4 = 48 packs.

That is the stock you will sell while you wait for the delivery. If you reorder when you have exactly 48 left, a normal delivery arrives as you run out, and any delay or busy day leaves the shelf empty. So you add a buffer.

Safety stock

Two simple ways to set it:

Rule of thumb. Keep a few days of average sales. At 12 a day, three days is 36 packs.

Careful method. Safety stock = (highest daily sales x longest lead time) - (average daily sales x average lead time). If your best day is 18 packs and your slowest delivery took 6 days:

(18 x 6) - (12 x 4) = 108 - 48 = 60 packs

With the careful method, reorder point = 48 + 60 = 108 packs. With the rule of thumb it is 48 + 36 = 84 packs. The careful method suits products you cannot afford to run out of. The rule of thumb suits the rest.

How much to order

Order enough to cover demand until the next order plus your buffer, and consider case sizes and supplier minimums. Do not order so much that stock sits unsold or expires.

Where the numbers come from

Average daily sales come from your sales history over a normal period (a few weeks, ignoring unusual spikes). Lead time comes from how long your last few deliveries actually took, not what the supplier promised.

Set the minimum, then use the list

Enter the reorder point as the minimum stock on each product. Then you do not need to walk the shelves: the low-stock list shows what to order, and you order in one go.

How DukaanAI helps

Each product in DukaanAI has a minimum stock level. When stock reaches it, the product appears under low stock on your dashboard and in the inventory list, and out-of-stock items are flagged separately. Your sales by product report shows what actually sells. Read the wider guide on managing inventory in a small shop.

Frequently asked questions

What is the reorder point formula?

Reorder point = (average daily sales x supplier lead time in days) + safety stock. When stock falls to that level, place a new order.

How much safety stock should I keep?

A simple rule is a few days of average sales. A more careful rule is (highest daily sales x longest lead time) minus (average daily sales x average lead time).

Should every product have the same minimum stock?

No. Fast movers with long lead times need a higher minimum than slow movers that you can restock the same day.

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