The basic formula
Reorder point = expected demand during supplier lead time + safety stock.
When demand is fairly steady, a simple version is: average units sold per day × lead time in days + safety stock.
A worked example
Suppose a shop sells 12 units a day, the supplier normally takes 7 days, and the shop keeps 20 units as safety stock. The estimate is 12 × 7 + 20 = 104 units. Use the same time units throughout, and measure lead time from placing the order until the goods are ready to sell.
Compare this threshold with the stock measure your inventory system uses. Depending on its settings, that may account for available units, confirmed incoming orders, or demand already committed to customers.
Use a realistic lead time
Include the usual supplier preparation, transit, and receiving time until the item can be sold. Review past deliveries instead of relying on one unusually fast or slow shipment.
Choose safety stock carefully
Safety stock is a buffer for variation in demand or delivery. There is no single amount for every product. Consider sales history, supplier reliability, storage space, the cost of holding inventory, and the service level you want.
The reorder point is not the order quantity
The reorder point helps decide when to review or start replenishment; it does not tell you how many units to buy. Minimum order quantities, budget, storage, and ordering frequency can affect the order size.
Review the estimate when conditions change
Seasonal demand, promotions, supplier changes, and new sales trends can make an old average misleading. Update the inputs with recent records. This simple calculation does not forecast sales or place orders automatically.
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