Inventory glossary

What is Order point?

Order point is the inventory level at which a store should place a new purchase order so stock does not run out before replenishment arrives.

For a small Shopify store, the order point tells you exactly when to act instead of guessing. If you check stock by feel, you either order too late and run out, or order too early and tie up cash in extra inventory sitting on a shelf.

Set an order point for each SKU using how fast it sells and how long the supplier takes to deliver. When stock on hand drops to that number, you place the order that day, not next week.

Formula

Order point = (Average daily sales x Lead time in days) + Safety stock

Example

A candle shop sells 6 units a day of its vanilla candle. The supplier lead time is 10 days, and the shop keeps 15 units of safety stock. Order point = (6 x 10) + 15 = 75 units. When stock hits 75, the shop places a new order.

Common mistakes

  • Using one order point for all SKUs instead of calculating it per item based on its own sales speed and lead time.
  • Forgetting to update the order point when sales trends change, like during a new season.
  • Ignoring supplier lead time changes, so the order point becomes too low and stock runs out before the new order arrives.

Order point and SteadyShelf

SteadyShelf tracks sales per variant and each supplier's lead time, then tells you the order-by date for each SKU so you do not have to calculate order points by hand.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

Related terms

Reorder point · Safety stock · Lead time · Average daily sales · Reorder quantity

Full inventory glossary

FAQ

Is order point the same as reorder point?

Yes. Order point and reorder point mean the same thing: the stock level that triggers a new purchase order.

What happens if the order point is set too low?

The store runs out of stock before the new order arrives, because there is not enough inventory left to cover sales during the supplier's lead time.

Let SteadyShelf do this math for every SKU

Order-by dates per supplier, seasonal forecasts and draft POs for your Shopify store. $29/month after a 30-day free trial.

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