How to Calculate Reorder Point
What is Reorder Point?
Calculates the inventory level at which to place a new order to avoid stockouts. Accounts for lead time and demand variability.
Formula
Formula: reorder point = (D × LT) + SS
- D
- D value — Variable used in the calculation
- LT
- LT value — Variable used in the calculation
- SS
- SS value — Variable used in the calculation
Step-by-Step Guide
- 1Average daily demand (D)
- 2Lead time in days (LT)
- 3Safety stock (SS)
- 4Formula: reorder point = (D × LT) + SS
- 5Reorder when inventory reaches this level
Worked Examples
Input
50/day use, 5day lead
Result
Order at 250
Common Mistakes to Avoid
- ✕Ignoring lead time variability
- ✕Not updating for seasonal demand changes
Frequently Asked Questions
Why is reorder point important?
Prevents stockouts by triggering orders in advance, accounting for lead time.
How does lead time affect reorder point?
Longer lead times require higher reorder points and more safety stock.
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