Reorder point
What is a reorder point?
The reorder point is the stock level at which replenishment should be triggered: at or below it, order; above it, wait. It is set from how fast the item sells, how long replenishment takes, and how much variability you are willing to absorb, so that the new stock arrives before the old stock runs out.
Setting the number
- Take average daily usage over a period that reflects how the item actually moves.
- Take lead time: the full span from order to stock on the shelf, not the supplier's quoted transit.
- Multiply usage by lead time: that is the stock that will be consumed while waiting.
- Add safety stock for the variability you decided to buffer against: that sum is the reorder point, compared against inventory position (on hand plus on order) rather than on-hand stock alone.
When it breaks
When the inputs rot: usage that changed six months ago, lead times that quietly lengthen, or a count that no longer matches the system. A reorder point computed from wrong data fires at the wrong moment with complete confidence, which is worse than no rule at all, because nobody questions a number the system produced. Reviews of slow movers and late suppliers keep the rule current.