Reorder Point Formula and Calculator

Q: What is the reorder point formula?

Reorder point = average daily demand × lead time in days + safety stock. At 85 units a day, a 38-day lead time and 874 units of safety stock, that is 3,230 + 874 = 4,104 units. Without safety stock it is demand during lead time alone.

Q: How do you calculate a reorder point?

Measure average daily demand and the full lead time from PO to sellable stock. Multiply them to get demand during lead time. Add safety stock, ideally from a service level and the spread of demand and lead time. Round each part up to whole units.

Q: How is the reorder point calculated with standard deviation?

Safety stock = Z × √(LT × σD² + D² × σLT²), and the reorder point is D × LT plus that figure. At 95% service Z ≈ 1.645. With σD = 24 units and σLT = 6 days on the example, safety stock is 874 units and the reorder point 4,104.

Q: What is EOQ and ROP?

EOQ, economic order quantity, is how much to order each time. ROP, the reorder point, is the stock level that tells you when to order. A reorder rule needs both: when inventory position falls to the ROP, you order the EOQ.

Q: What is the formula to calculate EOQ?

EOQ = √(2 × annual demand × cost per order ÷ annual holding cost per unit). With 31,025 units a year, an example $150 per order and an example holding rate of 25% on a $11 unit, EOQ rounds up to 1,840 units.

Q: How do you calculate the reorder quantity?

With a fixed order size, the reorder quantity is your EOQ or supplier minimum. With an order-up-to level, order that level minus inventory position. On the example, an order-up-to level of 7,104 reached at the reorder point of 4,104 means ordering 3,000 units.

Q: What is the difference between reorder point and safety stock?

Safety stock is the buffer held against demand spikes and late deliveries. The reorder point is the trigger level, and it contains that buffer plus the stock you expect to sell while the order is on its way. Safety stock is an input; the reorder point is the decision.

Q: What lead time should I use in the reorder point formula?

Use the full elapsed time from sending the PO to stock being sellable: production, booking, transit, customs, inland freight and receiving. On the example, production alone is 15 days but the full lead time is 38 days.

Q: Should the reorder point include stock on order?

Yes. Compare the reorder point with inventory position: stock on hand plus stock already ordered but not received, minus any backorders. Comparing with on-hand stock alone triggers a second order while the first is still at sea.

Q: Why does a reorder point without safety stock run short so often?

Demand during lead time is above its average in about half of all cycles. A reorder point with no buffer covers only the average, so it matches a 50% service level, where Z = 0. Safety stock at a higher service level lowers those odds.

Reorder point = demand during lead time + safety stock. Selling 85 units a day on a 38-day lead time, with 874 units of safety stock at 95% service (Z ≈ 1.645), you reorder at 3,230 + 874 = 4,104 units.

Reorder point (demand + lead time) 4,104 units 48.3 days of cover · Z ≈ 1.645

Safety stock874

Lead-time demand3,230

Next orderWithin 10 days

Average daily demand (units)

Total lead time (days)

Stock on hand + on order

Std deviation of daily demand

Std deviation of lead time (days)

Service level (%)

Buffer, max-case and order inputs

Your buffer (units)

Buffer in days of sales

Maximum daily demand (units)

Maximum lead time (days)

Order quantity (units)

Unit cost (USD)

Formula with your numbers85 × 38 = 3,230; SS = 1.645 × √(38 × 24² + 85² × 6²) = 873.5 → 874; ROP = 3,230 + 874 = 4,104 units

Order-up-to level7,104 units

Expected stock when it lands3,874 units

Safety stock value$9,614

Every method on your numbers

Method	Safety stock	Reorder point	Days of cover	Reads as
Basic (no safety stock)	0 units	3,230 units	38.0	Covers average demand only. Half of cycles run short.
Fixed buffer in units	600 units	3,830 units	45.1	A buffer you chose. No stated service level.
Buffer as days of sales	595 units	3,825 units	45.0	Simple rule of thumb. Not linked to variability.
Max minus average	3,270 units	6,500 units	76.5	Worst case on both inputs at once. Usually oversized.
Demand variability	244 units	3,474 units	40.9	At your service level, if lead time never moves.
Demand and lead-time variability	874 units	4,104 units	48.3	At your service level, with late deliveries counted.

The calculation runs in your browser. Demand during lead time and safety stock each round up to whole units, because part of a unit cannot cover demand. "Order within" rounds down to whole days.

How to

How to Calculate a Reorder Point in 5 Steps

Measure average daily demand (D). Units sold per day for one SKU at one location, with stockout days and one-off promotions removed.
Measure the full lead time (LT). Days from sending the purchase order to stock being sellable, not the supplier's production quote.
Work out demand during lead time. Multiply D by LT and round up. This is what you expect to sell while the order is on its way.
Add safety stock (SS). Pick a method from the table below. The full formula uses a service level and the spread of demand and lead time.
Compare with inventory position. When stock on hand plus stock on order falls to the reorder point, place the next order.

What the symbols mean. D is average daily demand, σD its standard deviation, LT the average lead time in days and σLT its standard deviation. Z is the service level factor. Keep every input in the same time unit.

Formulas

Six Ways to Set the Safety Stock in a Reorder Point

The demand-during-lead-time part never changes. What changes is how you size the buffer on top. The last column runs each one on the Denver example below.

Method	Formula	Use it when	Where it fails	Reorder point on the example
Basic	`D × LT`	A first look at a new SKU.	No buffer, so it matches a 50% service level.	3,230 units
Fixed buffer	`D × LT + SS`	Your planning system already gives you SS.	Only as good as the buffer you feed it.	3,830 units
Days of sales	`D × LT + D × N`	You want a quick rule across many SKUs.	Ignores how much demand and lead time actually swing.	3,825 units
Max minus average	`Dmax × LTmax`	History is too short for a standard deviation.	Assumes the worst day and the worst lead time arrive together.	6,500 units
Demand variability	`D × LT + Z × σD × √LT`	The supplier is reliable and arrival dates barely move.	Ignores late deliveries entirely.	3,474 units
Demand and lead time	`D × LT + Z × √(LT × σD² + D² × σLT²)`	Both demand and arrival dates vary. The default for imported stock.	Needs real receipt dates to be honest.	4,104 units

Max minus average runs large

On the example it sets 3,270 units of safety stock, 3.7 times the 874 units the full formula needs at 95%. A worst day and a worst lane rarely land in the same cycle.

Demand-only runs small on import lanes

Ignoring the 6-day lead-time deviation drops the buffer to 244 units and the reorder point to 3,474. Lead time drives 92% of the variance under the square root here.

Worked example

Worked Example: A Denver Brand Importing by Ocean

A Denver, Colorado outdoor brand sells an insulated bottle online. It is made in Guangdong, shipped from Yantian to Los Angeles, and trucked to a Denver warehouse. These are example figures.

85 units

Average daily demand

Units sold per day over the last 12 months, stockout days removed.

38 days

Total lead time

PO sent to sellable stock in Denver, the six steps below added up.

24 units

Demand deviation

Standard deviation of the same daily sales figures.

6 days

Lead-time deviation

Standard deviation of actual PO-to-receipt times on past orders.

Step	Working	Result
Demand during lead time	`85 × 38`	3,230 units
Z at 95% service	`NORM.S.INV(0.95)`	≈ 1.645
Safety stock	`1.645 × √(38 × 24² + 85² × 6²) = 873.5`	874 units (rounded up)
Reorder point	`3,230 + 874`	4,104 units
Days of cover at the trigger	`4,104 ÷ 85`	48.3 days
When to order	`(5,000 − 4,104) ÷ 85, rounded down`	Within 10 days
Order-up-to level	`4,104 + 3,000`	7,104 units
Expected stock when the order lands	`874 + 3,000`	3,874 units
Value held as safety stock	`874 × $11`	$9,614

Reading it. The brand holds 5,000 units on hand and on order, 896 above the trigger. At 85 a day it crosses 4,104 in under 11 days, so the PO goes out within 10. These are the calculator's defaults, so you can change any figure above and watch the answer move.

Lead time

Lead Time Is Not the Number Your Supplier Quoted

A supplier's quote usually covers making the goods. The formula needs the time until the stock is sellable. Here are the example's six steps, added up.

Step	Days in this example	Who controls it	What happens
Supplier production	15	Supplier	Starts when the PO is confirmed and any deposit clears, not when you send it.
Booking and cargo to port	4	Forwarder	Space booking, trucking to the terminal, cut-off and rollover risk.
Ocean transit, Yantian to Los Angeles	13	Carrier	Port to port. Transhipment or a blank sailing stretches it.
Customs clearance and port release	2	Customs broker	Entry filing and release. An exam or a hold adds days.
Inland truck to Denver	3	Trucker	Drayage out of the port, then line haul to the warehouse.
Receiving and putaway	1	Warehouse	Dock slot, unload, count, label and make the stock sellable.
Total lead time	38	You	The figure the reorder point formula needs.

Day counts are example values for one lane, not benchmarks. Measure your own from PO date to sellable stock on past receipts.

Production is a fraction
On the example, production is 15 of 38 days. A reorder point on 15 days covers 1,275 units of demand instead of 3,230.

Receiving counts
Stock on a dock is not sellable. Count unload, check-in and putaway, plus any marketplace inbound queue.

Customs varies more than it lasts
Most entries clear quickly. The risk is an occasional exam or hold, so it belongs in σLT as much as in LT.

Measure receipts, not quotes
Use actual dates from your last ten or more receipts. A quoted lead time is a target; receiving records are evidence.

Service level

Service Level to Z Score, and What It Does to the Reorder Point

Z is the inverse standard normal at your cycle service level, computed to three decimals. The last two columns apply each Z to the Denver example.

Service level	Z score	Stockout cycles per 100	Safety stock	Reorder point
50%	0.000	50	0 units	3,230 units
80%	≈ 0.842	20	447 units	3,677 units
85%	≈ 1.036	15	551 units	3,781 units
90%	≈ 1.282	10	681 units	3,911 units
95%	≈ 1.645	5	874 units	4,104 units
97%	≈ 1.881	3	999 units	4,229 units
98%	≈ 2.054	2	1,091 units	4,321 units
99%	≈ 2.326	1	1,236 units	4,466 units
99.5%	≈ 2.576	0.5	1,368 units	4,598 units
99.9%	≈ 3.090	0.1	1,641 units	4,871 units

1.645 or 1.65?

At 95% the exact Z is about 1.6449. Tables that round it to 1.65 return 877 units on the example instead of 874.

The last points cost most

Moving from 90% to 95% adds 193 units on the example. Moving from 95% to 99% adds 362.

Cycle service is not fill rate

Cycle service level counts order cycles with no stockout. Fill rate counts the share of units shipped from stock. One buffer gives a different figure on each.

ROP, EOQ and safety stock

Reorder Point vs EOQ vs Safety Stock

These three are often mixed up. Each answers a different question, and a working replenishment rule uses all three.

Question	Calculation	Formula	On the example
How big should the buffer be?	Safety stock	`Z × √(LT × σD² + D² × σLT²)`	874 units
When do I order?	Reorder point (this page)	`D × LT + SS`	4,104 units
How much do I order?	Economic order quantity	`√(2 × annual demand × S ÷ H)`	1,840 units at example costs

The EOQ figure uses an example ordering cost of $150 per PO and an example holding rate of 25% a year on a $11 unit. Replace both with your own.

Order of work. Size the buffer first, then set the trigger, then the order size. Change any one, such as a new supplier or a bigger order, and re-check the other two.

Inventory position

Compare the Reorder Point With Stock on Hand Plus on Order

The trigger is inventory position, not the count on the shelf. On a long lane, an order is often still at sea when the next one comes due.

3,100units on hand in Denver

1,900units on order, in transit

5,000inventory position

4,104reorder point

Using on-hand only

3,100 is 1,004 units below the trigger, so the system raises a PO today. That doubles up on the 1,900 units already on the water.

Using inventory position

5,000 is 896 units above the trigger. No order yet; the next PO is due within 10 days at 85 units a day.

Spreadsheet

Reorder Point in Excel or Google Sheets

The same functions work in both. Put one SKU per row and keep raw daily sales and receipt dates on separate tabs.

Cell	Holds	Formula	Example value
B2	Average daily demand	`=AVERAGE(daily_sales)`	85
C2	σ of daily demand	`=STDEV.S(daily_sales)`	24
D2	Average lead time	`=AVERAGE(lead_times)`	38
E2	σ of lead time	`=STDEV.S(lead_times)`	6
F2	Z score	`=NORM.S.INV(0.95)`	≈ 1.645
G2	Safety stock	`=ROUNDUP(F2SQRT(D2C2^2+B2^2*E2^2),0)`	874
H2	Reorder point	`=ROUNDUP(B2*D2,0)+G2`	4,104
I2	Order now?	`=IF(position<=H2,"Order now","OK")`	OK

Named ranges such as daily_sales stand in for your own cell ranges. ROUNDUP keeps the sheet consistent with the calculator above.

Mistakes

Six Reorder Point Mistakes

Using the production quote as lead time

15 days instead of 38 covers 1,275 units of lead-time demand instead of 3,230. The order lands weeks after the shelf empties.

Ignoring stock on order

Comparing the trigger with on-hand stock raises a second PO while the first is in transit. Use on hand plus on order.

Leaving lead-time swings out

The demand-only formula gives 3,474 units on the example. Counting the 6-day lead-time deviation gives 4,104.

Rounding down

Safety stock of 873.5 units needs 874 on the shelf. Rounding to the nearest unit can leave you one short of the level you chose.

Mixing time units

Weekly demand with lead time in days breaks the answer by a factor of seven. Convert everything to days first.

Counting stockout days as zero sales

Days with nothing to sell drag average demand down, so the reorder point drops a little more each time it fails.

Peaks

Reorder Points Around Prime Day and Black Friday

A reorder point built on a 12-month average is wrong in both directions during a peak. Demand rises and lead time stretches at the same time.

A campaign is not variance

A planned spike is not random. Plan peak stock from the campaign forecast and keep the formula for baseline weeks.

Lead time stretches too

Ocean space tightens and receiving queues grow before peak. Raise LT and σLT for orders landing in that window.

Work back from a date

A reorder point is a level; a peak is a date. Set the last PO date for peak stock, then order to the forecast.

Reset after the peak

Take peak weeks out of the history before you recalculate, or the next quarter's trigger sits too high.

Upkeep

Keep the Reorder Point Current

A reorder point is a snapshot of demand and one lane. Both drift, so it needs a review cadence and named triggers.

Recalculate monthly for fast movers and quarterly for the rest, per SKU and per stocking location.
Recalculate straight away after a supplier change, a new lane, a new warehouse or a new order size.
Re-measure lead time when a receipt lands well outside its usual range.
On a periodic review, add the review interval to lead time; the result is an order-up-to level.
Check that the system compares the trigger with inventory position, not on-hand stock.
Sanity-check days of cover. A trigger far above the lead time in days means an input needs a second look.
Steadier lanes cut the buffer. On the example, σLT of 2 days instead of 6 cuts safety stock from 874 to 371 units, 58% less.
Name an owner for each SKU group, so trigger levels get reviewed rather than inherited.

Next step

Related Inventory Planning Tools

Safety stock calculator Size the buffer inside the reorder point with six methods and a service level cost curve. EOQ calculator Set how much to order once the trigger is hit, balancing ordering and holding cost. Carrying cost calculator Work out what holding the buffer and cycle stock costs you across a year. 3PL cost calculator Estimate storage and fulfillment fees for the stock level the reorder point implies.

Raise the order with the purchase order template, browse all free logistics tools, or read how Locad handles warehousing and ecommerce fulfillment for the stock you hold.

FAQ

Reorder Point Formula Questions