Reorder Point

The inventory level that triggers a new purchase order from suppliers.

1 min readLast updated Apr 2026

Reviewed by Golden Digital·Operator-reviewed ecommerce reference

Formula

(Average Daily Sales × Lead Time) + Safety Stock

Example: Daily sales: 25 units. Lead time: 21 days. Safety stock: 150 units. Reorder Point = (25 × 21) + 150 = 675 units

The inventory level that triggers a new purchase order from suppliers.

Why It Matters

Reorder points prevent stockouts by ensuring you order before running out. Without automated reorder triggers, human error leads to missed reorders, emergency air freight costs, and lost sales. It's essential for consistent inventory availability.

Formula

(Average Daily Sales × Lead Time) + Safety Stock

Example: Daily sales: 25 units. Lead time: 21 days. Safety stock: 150 units. Reorder Point = (25 × 21) + 150 = 675 units

Practical Example

Scenario

A skincare brand sets reorder points for their core products.

Calculation

Daily sales: 25 units. Lead time: 21 days. Safety stock: 150 units. Reorder Point = (25 × 21) + 150 = 675 units

Result

When inventory hits 675 units, a PO is triggered automatically. This provides 21 days of normal sales plus 6 days buffer (150 units) for variability.

Pro Tips

1Automate reorder point alerts—don't rely on manual inventory checks
2Review and adjust reorder points quarterly as sales velocity changes
3Factor in holidays/weekends in lead time calculations
4Set different reorder points for high/low season if demand is seasonal

Common Mistakes to Avoid

Using the same reorder point year-round despite seasonal demand shifts

Not updating reorder points when lead times change (common with overseas suppliers)

Setting reorder points too low to minimize inventory (leads to stockouts)

Frequently asked questions

EOQ determines how much to order; reorder point determines when. Use both together: trigger a PO at the reorder point and order the EOQ quantity. This balances ordering costs with carrying costs while preventing stockouts.

For new products, estimate based on: similar product sales, marketing investment plans, and conservative forecasts. Start with higher safety stock (50% buffer) until you have 90 days of actual sales data to calculate properly.

Put it to work

Related Terms

Safety Stock

Extra inventory kept as a buffer against unexpected demand spikes or supply disruptions.

Lead Time

Total time between placing a purchase order and receiving goods in inventory.

ONE FREE AUDIT

Run your free Shopify audit.

50+ factors. Real fixes. Same framework we run for $10M brands.

Run a Free Audit Tell us about your brand

Free · No credit card required

You'll talk directly to the people doing the work.

7.7x blended return at scale — seven figures attributed, across five straight quarters · Modern Prairie · Apr 2025–Jun 2026 Read the Modern Prairie case study