Inventory glossary

What is Reorder point?

Reorder point is the stock level at which you need to place a new order so the next shipment arrives before you run out.

If you wait until a shelf looks empty to reorder, you will sell out before the new stock arrives because suppliers take time to ship. The reorder point tells you the exact inventory number that should trigger a purchase order, based on how fast you sell and how long shipping takes.

Use it by checking current stock on hand against this number for each SKU. Once stock drops to or below the reorder point, place the order that day. Build in some safety stock too, since sales rarely move at a perfectly even pace.

Formula

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

Example

A candle shop sells 6 units of a scented candle per day on average. The supplier's lead time is 10 days. They keep 15 units of safety stock. Reorder point = (6 x 10) + 15 = 75 units. When stock hits 75, they place the order.

Common mistakes

  • Using total stock across all variants instead of calculating a reorder point per SKU.
  • Forgetting to update the reorder point when sales speed up, such as before a holiday.
  • Ignoring lead time changes, like a supplier switching from 2 weeks to 4 weeks.

Reorder point and SteadyShelf

SteadyShelf calculates a reorder point for each SKU automatically using your sales history and each supplier's lead time, then tells you the date to order by.

Work it out for your own products with our free tool: Reorder point calculator.

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

Related terms

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

Full inventory glossary

FAQ

What happens if I order at the reorder point but my supplier is late?

You may run out of stock before the new shipment arrives. This is why safety stock is added to the reorder point calculation, to cover delays and sales spikes.

Is the reorder point the same as the par level?

No. The reorder point is the trigger to place an order. Par level is often used for the target stock level you want to return to after reordering, which can be a different number.

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.

Get early access