A reorder point tells you when to place the next purchase order for a product. For a small business that reviews inventory continuously, a practical starting formula is average daily demand multiplied by replenishment lead time, plus safety stock. Calculate it separately for each SKU and location that needs its own supply.
Suppose a shop sells four replacement filters per calendar day. Its supplier takes seven calendar days to deliver usable stock, and the owner chooses a 12-unit buffer. The reorder point is (4 × 7) + 12 = 40 units. That is the replenishment trigger. The quantity to buy requires a separate decision.
The numbers in this guide are fictional examples you can check by hand. They are not customer results or a recommendation to carry the same buffer in every business.
Start with demand during lead time
inFlow's reorder point guide describes the standard demand-times-lead-time calculation with an added safety-stock allowance. The useful work happens before you multiply: choosing a representative demand period and measuring how long replenishment actually takes.
Use matching units throughout. If demand is measured per calendar day, lead time must also use calendar days.
For the filter example, expected demand while waiting is 28 units. The additional 12 units provide a buffer against some delays or extra demand. They do not guarantee that the shop will avoid a stockout.
| Input or result | Value | How it was obtained |
|---|---|---|
| Units demanded | 120 | Illustrative 30-day period with stock available |
| Average daily demand | 4 units | 120 ÷ 30 |
| Lead time | 7 days | Order placement to usable receipt |
| Safety stock | 12 units | Chosen assumption, equivalent to three average days |
| Lead-time demand | 28 units | 4 × 7 |
| Reorder point | 40 units | 28 + 12 |
Choose inputs that reflect the next replenishment
Use units demanded, not sales revenue. A higher selling price can increase revenue without changing the number of units you need to replenish. Keep a separate row for each size, color or part number; a total for an entire product family can hide a shortage of its busiest variant.
Historical sales are a useful demand proxy only when stock was available. If a filter sold out for ten days, dividing its recorded sales by the whole month can understate demand. Record the stockout and examine unfilled orders or a comparable in-stock period. Do not invent missed sales to fill the gap.
Measure lead time through the point at which the delivery is ready to use. Supplier processing, transit and receiving checks can all add time. Keep actual order and usable-receipt dates. If partial deliveries arrive, record what quantity became available on each date rather than treating the first small shipment as full replenishment.
A recent average may be unsuitable during a planned promotion, a supplier shutdown or a seasonal change. Write down why you selected the demand period and review that choice before committing cash to the purchase order.
Check inventory position before ordering twice
Looking only at the shelf count can trigger a duplicate order when replenishment is already on the way. A basic inventory-position calculation is usable on-hand stock plus open replenishment orders, minus unfilled customer demand. Keep your definitions consistent: if an available-stock figure already subtracts allocations, do not subtract the same units again.
| Record | Units |
|---|---|
| Usable on hand | 32 |
| Open replenishment order | 24 |
| Unfilled customer demand | 8 |
| Inventory position: 32 + 24 − 8 | 48 |
The shelf count of 32 is below the 40-unit trigger, but inventory position is 48. Under this simple continuous-review policy, that does not trigger another order. Check the arrival date anyway: a late delivery can leave a near-term shortage even when inventory position looks adequate. An uncertain or overdue order needs investigation, not automatic confidence.
Exclude damaged or quarantined units from usable stock. Reconcile orders, receipts and returns with your sales and inventory records so the calculation uses quantities you can explain.
Separate when to buy from how much to buy
For a brand-new boutique, use a cash ceiling and a small test assortment for the opening inventory purchase. A reorder point becomes useful after you have observed demand and actual replenishment time for a SKU. Keep the first buy and the later replenishment decision separate.
A 40-unit reorder point does not mean every purchase order should contain 40 units. Order quantity depends on your replenishment policy, demand outlook, case packs, minimum order quantity, storage and available cash. Expiry dates can make a large discount less attractive than it first appears.
For example, if your independently chosen target inventory position is 100 units and the current position is 40, the gap is 60 units. With a 24-unit case pack, buying whole cases would require 72 units to meet or exceed that target. Your resulting position would be 112. That extra stock should be a visible purchasing decision, not hidden rounding.
Allow for the time between reviews
The basic trigger assumes you review stock often enough to act when the threshold is reached. If you check only once a week, demand continues between reviews. A weekly review policy needs to cover the review interval as well as supplier lead time.
With four units of daily demand, seven days between reviews, seven days of replenishment lead time and the same assumed 12-unit buffer, an illustrative periodic-review target is 4 × (7 + 7) + 12 = 68 units. This is an order-up-to target for that simplified policy, not a replacement name for the 40-unit continuous-review trigger. Actual variability may require a different buffer.
Keep a reusable SKU worksheet
Use the fields below in your current spreadsheet or stock records. Record the source period and the person responsible for the next review so the number does not become a permanent setting without an owner.
| Field | Example entry |
|---|---|
| SKU and location | FLT-01 / Main store |
| Demand period and quantity | 30 calendar days / 120 units |
| Daily demand and lead time | 4 units / 7 calendar days |
| Buffer and reason | 12 units / illustrative three-day allowance |
| Trigger and review policy | 40 units / check each business day |
| On hand, on order, unfilled demand | 32 / 24 / 8 |
| Inventory position and action | 48 / verify incoming order date |
| Next review | After the next receipt or a material demand change |
Retain decimals during the calculation. If a finished trigger is 18.4 and you stock indivisible units, round the operational threshold up to 19. Keep the unrounded calculation in your notes. For bulk materials measured by weight or length, use the unit precision your operation actually supports.
Turn the trigger into a controlled purchase request
When inventory position reaches the trigger, create a purchase request with the SKU, required-by date, calculation date, open-order check and proposed quantity. Do not overwrite the reorder point with the order quantity: the first answers when to review, while the second reflects case packs, minimum order quantity, storage, demand outlook and available cash.
Carry the approved request into one purchase order and keep its PO number beside the replenishment record. As receipts arrive, update the same line’s accepted, rejected, cancelled and open quantities. The purchase-order tracker example shows how to keep a 100-unit order open after a partial delivery without ordering the balance twice.
Put the calculation beside your purchasing records
The NexalyPlanner Inventory & Procurement Planner product page describes SKU records, stock movements, purchase orders, receiving and reorder planning in an offline HTML system. Those records provide a place to organize the inputs and follow-up work discussed here. The arithmetic examples above are a planning method, not a claim that the product implements every policy in this guide.
Before moving your records, check the preview, supported browser and backup/import workflow. If you are comparing local tools with shared online systems, use the inventory software buying checklist. A formula will not correct an unrecorded receipt or a stock count entered against the wrong SKU.
Questions about reorder points
Is safety stock the same as the reorder point?
No. Safety stock is the buffer allowance. The reorder point also includes expected demand during replenishment lead time.
What if demand is zero?
Check whether the item is genuinely inactive, seasonal, newly introduced or unavailable during the measurement period. Zero recorded sales alone is not enough to decide whether it should be replenished.
How often should I update the calculation?
Review it when demand, supplier lead time or your service requirements change. A missed delivery, repeated shortage or accumulated excess stock is a reason to inspect the assumptions and records.
Can this method guarantee no stockouts?
No. Unexpected demand and supply delays can exceed the buffer. Track exceptions and adjust the policy using your own operating evidence.