Inventory planning · Step 2 of the chain
When should I reorder stock?
Your reorder point is the stock level that should trigger your next order, set low enough that you're not holding stock for nothing, high enough that resupply lands before you run dry. Put in your numbers and read your trigger level below.
Your result
Reorder point for this item
1,054 units
Raise a new order once stock falls to about 1,054 units. That covers your average demand across a 7 days (1 week) lead time (about 700 units) plus a 354-unit buffer for the swings in demand and lead time you entered, so resupply lands before you run dry.
Recommendation: lead-time variability is lifting this reorder point well above plain lead-time demand. Before you commit to holding that much, push your supplier for a tighter, more reliable lead time; shrinking lead-time swing pulls the reorder point down faster than improving demand forecasts.
Your numbers
Your reorder point, drawn to scale
The darker bar is the stock you expect to use while waiting for resupply; the lighter bar is the safety-stock buffer that absorbs demand and lead-time surprises. Added together they make your reorder point: the on-hand level, marked by the dashed line, that should trigger a new order.
Where this number comes from, and where it sits in your planning system
The formula
Your reorder point is the demand you expect to flow out during the lead time, plus a safety-stock buffer for the things that don't go to plan:
where d is average demand and LT is average lead time, both in the same time unit. The buffer is computed for you with the standard statistical safety-stock formula, which accounts for variability in both demand and lead time:
Here Z is the service-level factor, σd is demand variability, and σLT is lead-time variability. If your lead time is perfectly steady, the second term falls away and the buffer reduces to the familiar Z × σd × √LT. If both are steady, the buffer is zero and your reorder point is simply lead-time demand.
Service level and the Z-factor
The service level you pick sets the Z-factor: how many standard deviations of cover you carry. These are the standard values:
| Service level | Z-factor | Plain meaning |
|---|---|---|
| 90% | 1.28 | Out of stock in about 1 cycle in 10 |
| 95% | 1.645 | About 1 cycle in 20 |
| 97.5% | 1.96 | About 1 cycle in 40 |
| 99% | 2.33 | About 1 cycle in 100 |
| 99.9% | 3.09 | Near-continuous cover |
Higher cover is not automatically better. Every step up costs disproportionately more stock for less added protection; the last few percent of service level is the most expensive cover you will ever buy, and it lifts your reorder point right along with the buffer.
Where the reorder point sits in the chain
The reorder point is the second link. It takes the safety stock buffer, sized on the previous tool, and adds it to lead-time demand to give the on-hand level that triggers a new order. Once you know when to order, you size how much to order each time with Economic Order Quantity (EOQ), and the cost of getting the trigger wrong is what the Stockout-Cost Estimator puts a number on. Each tool hands its result to the next.
Terms used on this page
- Reorder Point (ROP)
- The on-hand stock level that triggers a new order: average lead-time demand plus safety stock.
- Lead-time demand
- The stock you expect to use up between placing a replenishment order and receiving it: average demand multiplied by average lead time.
- Safety stock
- Buffer inventory held to absorb variability in demand and lead time, on top of the stock you expect to use during replenishment.
- Service level
- The proportion of replenishment cycles you intend to satisfy without running out. A planning target you choose, not a law.
- Lead time
- The elapsed time from placing a replenishment order to the stock being available to sell or use.
- Standard deviation (σ)
- A measure of how much a quantity typically swings around its average. Larger σ means more variability and a bigger buffer.
Common questions
What is a reorder point?
The reorder point is the stock level that triggers a new purchase order. You set it so that the stock you have left when you order is just enough to cover demand until the resupply arrives, with a buffer for the swings in demand and lead time along the way.
How is the reorder point calculated?
Average demand across the lead time, plus a safety-stock buffer for variability: reorder point equals average demand times lead time, plus safety stock. This tool computes the buffer for you from your demand variability, your lead-time variability, and your target service level, using the standard statistical method.
What is the difference between the reorder point and safety stock?
Safety stock is only the buffer. The reorder point is the full trigger level: expected lead-time demand plus that buffer. Safety stock sits inside the reorder point, so raising your service level or your variability raises both together.
Do demand and lead time have to use the same time unit in the reorder-point calculation?
Yes, and mixing them is the most common reorder-point mistake. If demand is per day, lead time has to be in days too. This tool keeps both inputs in one unit with the days and weeks switch, so they always agree and you cannot accidentally pair daily demand with a lead time in weeks.
How often should I update my reorder point?
Whenever your lead time or demand changes materially: a new supplier, a seasonal shift, or a lasting change in how much you sell. A reorder point set once and forgotten silently drifts out of date, and the first sign is usually a stockout you did not see coming.
Next in the chain
This is your starting number, not your final answer. Validate it against your own lead times, costs, and demand before you act on it.