You've run out of a best seller before, and you know the feeling: a customer asks for it, the shelf is empty, and the next delivery is still days away. A reorder point fixes that. It's the stock level that tells you "order now," set high enough that new stock arrives before you run out. Here's the formula, how to work out each part from your own sales, a full example for a small shop, and the mistakes that throw the number off.
Why it matters
Running out of stock costs you twice. You lose the sale in front of you, and a customer who leaves empty-handed may not come back. Ordering too early has its own cost: cash tied up in boxes on a shelf, and less room for the products that are actually selling.
A reorder point sits between those two problems. Instead of guessing when to order, you set one number per product and act when stock hits it.
The formula used in operations courses is short. As the NC State Supply Chain Resource Cooperative explains, the reorder point is built from demand during the lead time plus a safety stock, and "the longer the lead times are, and the greater the variability of demand and lead times, the more SS [safety stock] we will need."
In plain terms:
Reorder point = (average daily sales × lead time in days) + safety stock
5 steps to calculate your reorder point
1. Find your average daily sales
Pick a recent, normal period, ideally 30 to 90 days, and count how many units of the product you sold. Divide by the number of days.
Example: a phone accessories shop sold 240 USB-C chargers in the last 30 days. 240 ÷ 30 = 8 chargers a day.
Use days the shop was open if you close on some days. If you're open 26 days a month, divide by 26, not 30.
2. Find your lead time
Lead time is the number of days from placing an order to having the stock on your shelf and ready to sell. Count the whole gap, not only shipping: the supplier's processing time, delivery, and the time it takes you to check and shelve the stock.
Example: the charger supplier usually takes 3 days to ship, delivery takes 1 day, and unpacking takes another day. Lead time = 5 days.
Look back at your last few orders rather than trusting the supplier's quoted time. If the quote says 3 days and it has actually taken 5 every time, use 5.
3. Calculate lead time demand
Multiply average daily sales by lead time. This is how many units you expect to sell while you wait for the new order.
Example: 8 chargers a day × 5 days = 40 chargers.
If you reorder at exactly 40, you'll run out on the day the delivery arrives, if everything goes perfectly. That's why you need step 4.
4. Add safety stock
Safety stock is a buffer for busy days and late deliveries. A simple rule of thumb many small shops use:
Safety stock = (highest daily sales × longest lead time) − (average daily sales × average lead time)
Example: the shop's busiest day for chargers was 12, and the slowest delivery took 6 days. (12 × 6) − (8 × 5) = 72 − 40 = 32 chargers.
This method is easy because you only need two extra numbers from your records. Larger businesses often use a statistical version based on how much sales and lead times vary, which the NC State tutorial above walks through. For a small shop with a handful of key products, the simple rule is a reasonable place to start.
5. Put it together
Add lead time demand and safety stock.
Example: 40 + 32 = 72 chargers. When the shop has 72 chargers left, it places the next order. On a normal week, the new stock arrives when about 32 are left. On a bad week, with heavy sales and a slow supplier, the buffer should still cover the gap.
A reorder point worksheet for your shop
Copy this table for your top products. Fill in the first four columns from your sales records and supplier history, then work out the last three.
| Product | Avg daily sales | Lead time (days) | Highest daily sales | Longest lead time (days) | Safety stock | Reorder point |
|---|---|---|---|---|---|---|
| USB-C charger | 8 | 5 | 12 | 6 | 32 | 72 |
| Phone case (popular model) | 4 | 7 | 7 | 10 | 42 | 70 |
| Screen protector | 10 | 3 | 15 | 4 | 30 | 60 |
| Bluetooth earbuds | 2 | 10 | 4 | 14 | 36 | 56 |
Worked check for the phone case row: lead time demand is 4 × 7 = 28. Safety stock is (7 × 10) − (4 × 7) = 70 − 28 = 42. Reorder point is 28 + 42 = 70.
Notice the earbuds. They sell slowly, but the long, unreliable lead time pushes the reorder point up. Slow sellers with slow suppliers often need a bigger buffer than you'd expect.
Before you start, run through this checklist:
- Sales figures come from a normal period, not a holiday rush or a stock-out week
- Lead time includes processing, delivery and shelving
- Lead time comes from real past orders, not the supplier's quote
- Each product has its own reorder point
- You've written a date to review the numbers
What to do when stock hits the reorder point
Knowing the number is half the job. The other half is acting on it the same day.
- Place the order right away. Every day you wait eats into your safety stock. If your supplier takes orders by message or email, send it as soon as you notice.
- Note the order date. When the stock arrives, compare the real lead time with the one you used. If it took longer, raise the lead time in your table.
- Watch the buffer. If you often find yourself dipping deep into safety stock before deliveries land, your reorder point is too low. If stock is still well above the buffer when new boxes arrive, it may be too high.
- Adjust for what's coming. If you know a holiday, school term or local event is close, order earlier or order more. The formula looks backwards at past sales, so it can't see a busy week ahead.
Example: the charger shop hits 72 units on a Monday and orders that afternoon. The delivery lands on Saturday, six days later, with 24 chargers left (72 minus 6 days of 8 sales). The buffer did its job, and the owner notes the extra day for next time.
Mistakes to avoid
Using one reorder point for everything. A fast seller with a local supplier and a slow seller shipped from overseas need very different numbers. Calculate each product on its own, starting with the 10 or 20 items that make you the most money.
Counting sales from a stock-out period. If a product was out of stock for a week, your sales for that month look lower than real demand. Leave those days out, or your reorder point will come out too low and you'll run out again.
Forgetting seasons. A reorder point set in a quiet month will be too low in your busy season. Recalculate before the months you know are busy.
Treating the reorder point as the order size. The reorder point is when to order, not how much. Decide the order quantity separately, based on supplier minimums, discounts and how much shelf space and cash you have.
Setting it and forgetting it. Sales change, suppliers change, prices change. A number that was right in spring can be wrong by autumn.
Not checking stock often enough. A reorder point only works if you notice when you hit it. If you count stock once a month, you can sail far below it before you find out. This is where tracking stock as you sell helps most.
How Cela can help
The hard part of a reorder point isn't the sum. It's knowing your real sales numbers and noticing the moment stock gets low. Cela is a point of sale and inventory app for iPhone that records sales as you make them, shows daily sales in clear reports, and alerts you before you run low on stock. That gives you the average daily sales figure for step 1 without digging through receipts. It works fully offline, so a weak connection in the shop doesn't stop you recording sales. You still choose your own suppliers, lead times and order sizes. For more guides on running a small shop, see the Cela blog.
Frequently asked questions
What is the reorder point formula?
The reorder point formula is: reorder point = (average daily sales × lead time in days) + safety stock. The first part covers what you expect to sell while you wait for a delivery. Safety stock is a buffer for days when sales run higher or the supplier is late.
How do you calculate reorder point without safety stock?
Multiply average daily sales by lead time in days. If you sell 10 units a day and delivery takes 4 days, the reorder point is 40. This only works if sales and delivery times never change, so most shops add at least a small safety stock on top.
What is the difference between reorder point and reorder quantity?
The reorder point tells you when to order: the stock level that triggers a new purchase. The reorder quantity tells you how much to order once you reach that point. A shop might reorder at 72 units and buy 200 at a time, for example.
How often should I recalculate my reorder points?
Recalculate whenever sales or delivery times change in a lasting way: a new season, a price change, a new supplier, or a product that suddenly sells faster. Many small shops review their best sellers once a month and slower items once a quarter.
Is reorder point the same as reorder level?
Yes. Reorder point and reorder level are two names for the same idea: the stock level at which you should place a new order. Both are worked out with the same formula, so you can use whichever term your supplier or accountant uses.
Conclusion
To calculate your reorder point, find your average daily sales, find your real lead time, multiply them, then add safety stock for busy days and late deliveries. For a shop selling 8 chargers a day with a 5-day lead time and 32 units of safety stock, that's a reorder point of 72. Start with your top sellers, write the numbers in a simple table, and review them each season. More small business guides are on the Alic Systems blog.