The reorder point formula
Reorder point = (average daily usage × lead time in days) + safety stock.
Daily usage is the number of units sold or consumed each day. Lead time covers the wait for replenishment, including any approval delay and the time needed to receive the goods. Safety stock is extra stock held for unexpected demand or late deliveries.
The result is a threshold, not the quantity to purchase. Your order size also depends on supplier minimums and how much stock you can afford to hold.
Use your own figures in the reorder point calculator .
Example: reordering copper elbows
Suppose a plumbing supply shop sells eight half-inch copper elbows a day. Replenishment takes three days, and the shop holds five elbows as safety stock.
Reorder point = (8 × 3) + 5 = 29 elbows.
With no delivery already on order, the shop places an order when stock reaches 29. It buys a case of 50. If sales stay at eight a day and delivery takes three days, five elbows remain when the case arrives. Receiving the case brings stock to 55.
If replenishment starts taking five days, the threshold becomes (8 × 5) + 5 = 45. A sustained increase in daily sales also needs a revised threshold; ordering more often alone does not cover the extra demand during the wait.
Which figures to use
For daily usage, divide units sold or consumed by the number of days in the period. A recent 60- to 90-day period can be a starting point, but check whether it represents the demand you expect next. An irrigation supplier's January sales will not necessarily describe April demand.
Use the same day basis for usage and lead time. Measure the full wait until stock is available to use. A PO awaiting internal approval for two days adds two days to that wait, even if the supplier delivers on schedule.
Choose safety stock based on how much demand and delivery times vary, and what a shortage would cost. There is no single number of buffer days that suits every item. The safety stock guide explains the calculations.
Set thresholds for each location
The same item can need different reorder points at a warehouse and on a service truck. Use the demand at each location and the time it takes to replenish it.
For a truck supplied by your warehouse, lead time includes the wait for an internal transfer. For a store supplied directly by a vendor, use the vendor's delivery time. Copying one threshold everywhere can leave too much stock at a quiet location and too little at a busy one.
Reviewing thresholds with AI
Across hundreds of SKUs, checking every threshold by hand takes time. An agent can compare recent usage and delivery times with the figures behind a reorder point, then suggest a change.
A useful suggestion should show the current threshold, the proposed value and the records used to calculate it. You need enough detail to spot a temporary sales spike or an unusual delivery delay before accepting the change. Approval rules should specify who can change a threshold or place an order, with a record of each approved change.
Before you place the order
Check open purchase orders before raising another one. A low shelf count may already have replenishment on the way. Check the due date too: an order arriving after you run out does not cover the immediate shortage.
Review thresholds when demand changes or a supplier starts taking longer. An average lead time can hide occasional long delays, so check the delivery history before deciding whether the buffer is enough.
Start with items where shortages interrupt customer orders or jobs, then extend the review as you gather reliable usage data. Keep a regular review date rather than leaving the original settings indefinitely.