A reorder point is the stock level at which a new order should be placed so items arrive before inventory runs out, based on demand and lead time.
A reorder point is the stock level at which a new order should be placed, set so that replacement stock arrives before the shelf is empty. It answers “when should we buy more?” with a number instead of a guess: when the quantity on hand falls to the reorder point, someone raises a purchase order. The number is built from three inputs - how fast the item gets used, how long the supplier takes to deliver, and how much safety stock you keep as a cushion.
The reorder point formula
Reorder point = (average daily usage x lead time in days) + safety stock
Each input deserves a moment of honesty:
- Average daily usage comes from what was actually consumed over recent months, not from what the budget assumed. Weekly or monthly usage divided down works fine.
- Lead time is the full gap from “we should order this” to “it is on the shelf, booked in” - including the days an order request sits unapproved and the day the delivery waits unopened. Supplier quotes routinely describe only the middle of that journey.
- Safety stock is the buffer for the weeks when both of the above behave badly at once.
A worked example
A workshop goes through 4 boxes of nitrile gloves a day. The supplier delivers in 5 working days, and the team holds 10 boxes of safety stock. The reorder point is (4 x 5) + 10 = 30 boxes. When the count hits 30, an order goes out; the 20 boxes consumed during the wait are covered by design, and the 10-box buffer absorbs a late van or an unusually busy week. If the order is sized to the supplier’s minimum order quantity or a target stock figure, the level jumps back up and the cycle restarts.
Reorder point vs neighbouring numbers
- vs safety stock - the buffer is part of the trigger, not a rival to it. Safety stock answers “how much cushion?”; the reorder point answers “when do we act?”.
- vs minimum stock level - the minimum is the floor you never want to breach; the reorder point sits above it by the amount expected to be used during the delivery wait.
- vs reorder quantity - the point says when to order, the quantity says how much. Conflating them is how teams end up ordering tiny amounts constantly, or a year’s supply at the worst moment.
Setting and revisiting reorder points
Set them roughly and revise them honestly. Usage shifts with seasons, headcount, and new contracts; supplier lead times drift, usually in the wrong direction. Two events should always prompt a review: a stockout (the trigger was too low or ignored) and a stocktake that finds the recorded count badly wrong - a reorder point compared against a fictional stock level triggers fiction. The trigger also depends on goods receiving being prompt, since stock that has arrived but not been booked in looks like a shortage. For teams managing consumables alongside equipment, AMPthilly stores a reorder point, target stock, and minimum order quantity on each consumable, and purchase orders go out as a PDF or straight to the supplier by email.
Related terms
- Safety Stock - the buffer baked into every well-set reorder point
- Minimum Order Quantity - the supplier rule that shapes how much each order brings in
- Purchase Order - the document the trigger fires off
- Goods Receiving - the step that keeps the on-hand count the trigger relies on truthful
- Stocktake - the periodic reality check on the numbers behind the trigger