Glossary
What is a reorder point?
A reorder point is the inventory level that triggers a replenishment order before stock runs out.
Definition
A reorder point answers one question: at what shelf level should the next order go out? Three inputs drive it: average daily usage, lead time, and safety stock. Reorder points are not the same as order quantity. The point tells you when to reorder. The quantity tells you how many to order. Most small businesses don't need a reorder point on every SKU. Set them on the twenty to fifty items where stockouts cost a job, a customer, or a margin. Leave the long tail manual until you have usage data. The most common mistake: setting reorder points once and never reviewing them. Usage drifts, lead times slip, seasonality shifts the inputs. Quarterly review (or AI-assisted suggestions) keeps thresholds honest.
Formula
Reorder Point = (Average Daily Usage x Lead Time in Days) + Safety Stock
Example
A plumbing supply shop sells 8 copper elbows per day, the supplier delivers in 3 days, and the shop holds 5 units of safety stock. Reorder Point = (8 × 3) + 5 = 29. When the shelf hits 29, a new order goes out.
By Cameron Priest · Co-founder, Order3
Cameron co-founded TradeGecko, the inventory platform acquired by Intuit. He has spent more than a decade building software for the people who run physical stock.
Updated 2026-06-16
Where this lives in Order3