Free tool
Reorder point calculator
Enter how fast the product sells, how long your supplier takes, and how confident you want to be. The calculator returns the stock level at which you should place the next order — and the safety stock inside it.
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The formula
A reorder point is not a guess or a round number. It is the answer to one question: how much stock do I need on hand to survive until the next delivery arrives? That is demand during the lead time, plus a buffer for the times demand or the supplier misbehaves.
The second term is the part most calculators skip. It combines two independent sources of risk — demand varying day to day (σd) and the supplier varying delivery to delivery (σL) — because in practice both go wrong, and occasionally both go wrong at once.
What each input means, and where to get it
| Input | What it is | Where to find it |
|---|---|---|
| Average daily demand (d) | Units sold per day over a representative period | Total units sold ÷ days in the period, from your sales history |
| Lead time (L) | Days from placing the order to stock being available to sell | Not the supplier's promise — your own measured average, including the day it sits in receiving |
| Demand std. deviation (σd) | How much daily demand bounces around the average | STDEV.P over daily sales in a spreadsheet |
| Lead time std. deviation (σL) | How unreliable the supplier is | STDEV.P over your recorded delivery times |
| Service level (Z) | The share of cycles you are willing to get through without stocking out | A business decision, not a measurement — see below |
Choosing a service level
Service level is the only input that is a choice rather than a fact. It sets how often you are prepared to run out during the replenishment window. 95% means you expect to stock out in roughly one cycle in twenty.
Higher is not automatically better. The safety stock term is linear in Z, so moving from 95% to 99.9% nearly doubles your buffer — and that stock is cash sitting on a shelf. A sensible split:
- 98–99% for A-class items and anything where a stockout loses the customer, not just the sale.
- 95% for the ordinary middle of the catalogue.
- 85–90% for the slow tail, where the carrying cost of a buffer outweighs the occasional wait.
ABC analysis is how you decide which product is in which bucket.
A worked example
You sell an average of 40 units a day. Your supplier takes 7 days, give or take a day and a half. Daily sales have a standard deviation of 12 units. You want a 95% service level.
- Lead time demand = 40 × 7 = 280 units
- σ = √(7 × 12² + 40² × 1.5²) = √(1,008 + 3,600) ≈ 67.9 units
- Safety stock = 1.65 × 67.9 ≈ 112 units
- Reorder point = 280 + 112 = 392 units
Note where the risk actually came from: 3,600 of the 4,608 variance came from the supplier being unreliable, not from demand bouncing. Tightening that lead time by half a day would cut the buffer more than any demand forecasting exercise.
Three ways this goes wrong
- Using the supplier's quoted lead time. Use what you have actually measured, from order placed to stock available to sell. The gap between the two is usually several days and is the single most common cause of stockouts at a "correct" reorder point.
- Setting one reorder point for the whole catalogue. The formula depends on per-product demand and lead time. A global threshold is guaranteed to be wrong for almost every product.
- Setting it once and never revisiting. Demand drifts and suppliers change. Recalculate at least quarterly, and immediately after any change of supplier.
Making the number do something
A reorder point in a spreadsheet is a number you have to remember to check. In SmartShelfKart it is a field on the product, watched against live stock, so crossing it puts the product on the Low Stock list and into the reorder suggestions — where it becomes a purchase order instead of a note.
Questions
What is the reorder point formula?
Reorder point = (average daily demand × lead time in days) + safety stock. Safety stock is Z × the standard deviation of demand over the lead time, which combines demand variability and lead-time variability.
What service level should I use?
Around 95% is a reasonable default for most items. Use 98–99% for high-value or customer-critical lines, and 85–90% for the slow tail where the carrying cost of a buffer outweighs the occasional wait.
Should I use the supplier's quoted lead time?
No. Use your own measured lead time — from placing the order to the stock actually being available to sell, including receiving and put-away. Quoted lead times are consistently optimistic, and the difference is a leading cause of stockouts at an otherwise correct reorder point.
What if my demand is completely steady?
Set both standard deviations to 0. Safety stock becomes 0 and the reorder point is simply lead time demand. In practice almost nothing is that steady, and a small buffer is cheap insurance.
How often should I recalculate?
Quarterly for most items, and straight away whenever you change supplier or a product's demand pattern shifts. A reorder point set two years ago is describing a business that no longer exists.
Is this calculator free?
Yes — free, no sign-up, no email required. It runs entirely in your browser and nothing you enter is sent anywhere.
Stop recalculating this by hand every month
SmartShelfKart keeps a reorder point on every product and watches it against live stock, so the number you just worked out becomes an alert instead of a spreadsheet you forget to update.