Understanding Reorder Points
The reorder point is the most important concept in inventory management. It tells you exactly when to place a new order to avoid stockouts.
What Is a Reorder Point?
The reorder point (ROP) is the inventory level at which you should place a new purchase order. When your stock drops to this level, it's time to reorder.
๐ฆ Current Stock
โ
โ (selling)
โ
๐ Reorder Point โ Place order here!
โ
โ (still selling while order ships)
โ
๐จ Stockout Zone โ Avoid this!
The Formula
Reorder Point = (Lead Time + Safety Stock Days) ร Daily Consumption
Component Breakdown
Lead Time
Definition: Days between placing an order and receiving inventory.
Includes:
- ๐ Supplier processing time
- ๐ Shipping time
- ๐ฆ Receiving & inspection
- โ Ready for sale
| Supplier Type | Typical Lead Time |
|---|---|
| Local/domestic | 3-7 days |
| Regional | 7-14 days |
| International (air) | 14-21 days |
| International (sea) | 30-60 days |
| Drop shipping | 1-3 days |
Where to set: App Settings โ Lead Time
Safety Stock Days
Definition: Extra buffer inventory to protect against:
- ๐ Unexpected demand spikes
- ๐ Supplier delays
- โ ๏ธ Quality issues
| Risk Level | Recommended Days |
|---|---|
| Low variability | 3-5 days |
| Medium variability | 5-10 days |
| High variability | 10-14 days |
Where to set: App Settings โ Safety Stock Days
Daily Consumption
Definition: Average units sold per day.
Calculated by: StockWise analyzes your order history automatically.
Example:
Last 30 days sales: 300 units
Daily consumption: 300 รท 30 = 10 units/day
Calculation Example
Let's walk through a complete example step by step.
Scenario
| Input | Value |
|---|---|
| Lead Time | 7 days |
| Safety Stock Days | 3 days |
| Daily Consumption | 10 units/day |
Calculation
Step 1: Add buffer time
7 days + 3 days = 10 days
Step 2: Multiply by consumption
10 days ร 10 units/day = 100 units
โ
Reorder Point = 100 units
Interpretation
When inventory drops to 100 units, place a new order.
Why This Works
You have 100 units and place an order
Keep selling ~10/day while order ships
Day 1: 90 units
Day 3: 70 units
Day 5: 50 units
Day 7: 30 units โ Order arrives!
You still have 30 units (3 days worth) as buffer
Visual Timeline
Stock
Level
โ
100โโโ ๐ Reorder Point (place order)
โ โ
โ โ
โ โ (selling 10/day)
โ โ
30โโโ ๐ก๏ธ Safety Stock โ Order arrives here
โ
0โโโ ๐จ Stockout
โ
โโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโ Time
Day 0 Day 7
Recommended Order Quantity
When you reach the reorder point, StockWise also calculates how much to order.
The recommendation considers:
| Factor | Impact |
|---|---|
| Days until next reorder | Coverage period |
| Projected consumption | Expected sales |
| Current stock | Starting point |
| Minimum order quantities | Supplier constraints |
Per-Product Customization
When to Customize
Not all products are the same. Consider customizing for:
| Situation | Adjustment |
|---|---|
| โญ High-value items | Higher safety stock |
| ๐ธ Seasonal products | Adjust before peak |
| ๐ Fast suppliers | Lower lead time |
| โ ๏ธ Critical items | Higher safety buffer |
How to Customize
Click on the product in the dashboard
Find the "Edit settings" button
- Lead Time
- Safety Stock Days
- Overstock Days
Click Save to apply
Custom settings override global defaults for that specific variant only.
Common Scenarios
Situation: Winter jacket with October-December sales spike
Strategy:
| Period | Action |
|---|---|
| Before peak | Increase safety stock +50% |
| During peak | Monitor closely |
| After peak | Return to normal settings |
Situation: Products shipped from overseas (30-day lead time)
Settings:
Lead Time: 30 days
Safety Stock: 10-14 days (higher due to variability)
Result: Reorder Point = (30 + 12) ร consumption
Situation: Supplier ships directly (2-day fulfillment)
Settings:
Lead Time: 2-3 days
Safety Stock: 1-2 days (minimal needed)
Result: Much lower reorder point than traditional inventory
Reorder Point vs. Days Remaining
StockWise shows both metrics:
| Metric | Question It Answers | Format |
|---|---|---|
| Reorder Point | "Do I need to order now?" | Units |
| Days Remaining | "How urgent is this?" | Days |
Stock level threshold in units
"Order when stock hits 100 units"
Time until stockout in days
"Stock will last 10 more days"
Both provide valuable but different perspectives.
Troubleshooting
Possible causes:
- Lead time overestimated
- Safety stock too conservative
- Consumption rate outdated
Solutions:
- Review actual supplier lead times
- Reduce safety stock days
- Wait for consumption rate to update
Possible causes:
- Lead time underestimated
- Insufficient safety buffer
- Consumption rate lower than actual
Solutions:
- Increase lead time to match reality
- Add more safety stock days
- Monitor for stockout risk
Common issues:
- Lead time setting too low
- Safety stock insufficient
- Consumption rate increased
Actions:
- Review recent sales patterns
- Increase lead time buffer
- Add safety stock days
Best Practices
Supplier performance can change
Update before peak periods
Track stockout frequency
Easier to reduce safety stock than recover from stockouts