How it works
Lead-time demand = units sold per day × days to receive an order
Safety stock = units sold per day × cushion days
Reorder point = lead-time demand + safety stock
Order quantity = units sold per day × days each order should cover
When stock falls to the reorder point, place the order. The stock on hand then covers sales until the order arrives, with the safety stock left over for a late delivery or a busy stretch.
A worked example
A pet-supply shop sells 12 bags of a food a day and gets orders in 7 days. Lead-time demand is 84 bags. Three days of cushion adds 36 bags of safety stock, so the reorder point is 120 bags.
The shop wants each order to cover two weeks, so it orders 168 bags, about $756 at $4.50 each. With 150 bags on the shelf now, it reaches the reorder point in 2.5 days.
Prefer to work it out yourself? Step-by-step guide: do this calculation by hand or in a spreadsheet.
Common mistakes
- Using last month's best day instead of an average. Use the average, then set the cushion for the busy days.
- Forgetting the shipping delay. The lead time starts when you order, not when the box leaves the warehouse.
- Reordering everything the same way. Fast sellers and slow sellers need different cushions.
What this doesn’t tell you
Uses an average daily sales figure and a fixed delivery time. Seasonal items, supplier delays, minimum order sizes and volume discounts all change the right answer. For items that sell in large, uneven swings, set a larger cushion or review the numbers each season.
Related calculators
Go deeper: 15 Numbers Every Small Business Owner Should Know, from The Groundwork Review.
Anticipated Questions
What is a reorder point?
The stock level at which you place a new order, so the stock you have lasts until the order arrives. It equals the demand during the delivery time plus a safety cushion.
How much safety stock do I need?
Enough to cover a busier-than-usual stretch or a late delivery, and no more, because every extra unit is cash sitting on a shelf. Start with a few days of sales and adjust after you see how often you run short.
How often should I recalculate?
Whenever your sales rate or delivery time changes, and at the start of each season. A fast mover may need a fresh number every month.
What if my supplier has a minimum order?
Use the larger of the minimum and the calculated order quantity, and check whether you can afford the cash. If the minimum is far more than you need, look for another supplier.
Opening or moving? See your odds with a Market Feasibility Study or Site Selection Analysis.
Sources
- University of Iowa, Dept. of Mechanical and Industrial Engineering (D. Bricker): Reorder Point lecture slides
- U.S. Small Business Administration: Manage your finances
Last reviewed October 19, 2026. How our calculators work. General information for planning, not legal, tax or financial advice. Found an error? Email info@groundworkbusinessadvisory.com.
