Calculating the reorder point

In the morning the storekeeper reports that an item is about to run out. An order goes out, but the delivery is two weeks late and the shelf stands empty. Or the reverse: orders go in every week "just in case" and spare cash sits in the warehouse. In both cases the question "when should we order?" was answered by eye. The reorder point turns that answer into a single number: when stock falls to it, a new order is placed.

The formula

Reorder point = average daily sales × lead time + safety stock.

The first term is what will sell between placing the order and the goods reaching the shelf. The second is a cushion for the unexpected (how to calculate it is covered in a separate article).

Example: a 10-litre bucket of water-based paint in a building-materials shop. On average 14 buckets sell per day, delivery arrives 6 days after the order, and safety stock is 25 buckets.

Point = 14 × 6 + 25 = 84 + 25 = 109 buckets.

The order is placed on the day stock reaches 109. During the 6 days of waiting, about 84 buckets will sell, so roughly 25 buckets remain when the delivery arrives and the safety stock is untouched. If demand rises or the delivery is late, those 25 buckets keep sales going.

Compare the stock position, not the shelf balance

The most common mistake is comparing the point with the shelf balance alone. The order is placed, the goods are on the road, and the shelf balance keeps falling. Next day it again looks "below 109", and a second order goes out, then a third.

The right measure is the stock position: shelf balance + orders in transit − quantity reserved for customers. Say the shelf holds 100 buckets, 150 are on the way and 20 are reserved. Position = 100 + 150 − 20 = 230. That is above 109, so no new order is needed. Look only at the 100 on the shelf and the system would say "order", and 150 extra buckets would arrive.

Take lead time from documents

What matters is not the supplier's promise but how many days actually passed. Pull the last five deliveries from 1C or Excel: from the order date to the receiving date. Say 5, 6, 9, 5 and 7 days. The average (5 + 6 + 9 + 5 + 7) ÷ 5 = 6.4 days, and we used 6. But two deliveries out of five (7 and 9 days) took longer than 6.

This is where the safety stock shows its meaning. 25 buckets ≈ 1.8 days of sales: if the delay exceeds two days, the item runs out. With a 9-day delivery demand is 14 × 9 = 126 buckets against a point of 109, so 17 buckets are missing. When a supplier usually runs up to 3 days late, it is handy to think of safety stock in days: 3 × 14 = 42 buckets, and the point becomes 84 + 42 = 126.

In Excel for many items

The table is simple: A is the item, B daily sales, C lead time (days), D safety stock, E the point. The formula for E2 is ROUNDUP(B2 × C2 + D2, 0), so the result is rounded up to a whole number. The separator (comma or semicolon) depends on your Excel settings.

Take daily sales from the last 60-90 days and exclude days when the item was out of stock: sales on those days are zero and make demand look lower than it is. You can write the result into the minimum-balance field in 1C or turn it into a simple "time to order" list.

The point only answers "when". "How much" to order is set by the batch size, the supplier's minimum order or the pack multiple.

When to recalculate

• When sales change by more than 20-25 percent: a promotion, the season, a new large customer.
• When the supplier, route or payment terms change, which means lead time changes.
• On a schedule, once a quarter, for group A items.
• When a stock count shows low record accuracy. Even a correct formula will signal too late or too early if the balance is wrong.

Conclusion

The reorder point replaces "it should be enough" with a number you can test. But it relies on a trustworthy balance and cleaned sales data. CountLab checks balances through stock counts and, with ABC/XYZ analysis, shows which items deserve tighter control of the point.