Setting Reorder Points: Never Run Out of Stock Again

A reorder point (ROP) is the inventory level at which you should place a new purchase order — early enough that the new stock arrives before you run out.

Reorder Point = (Average daily sales × Lead time in days) + Safety stock

If you sell 20 units per day, your supplier lead time is 14 days, and you want 5 days of safety stock, your ROP = (20 × 14) + (20 × 5) = 280 + 100 = 380 units.

When your stock level hits 380 units, place the next order.

Use at least 90 days of sales data to calculate average daily sales. Avoid using a period that includes unusual spikes (major promotions, viral moments) unless you want to carry stock for those scenarios.

For seasonal products, calculate separate ROPs for different seasons — your average daily sales in December may be 5× your July baseline.

Ask AskBiz: *'What is the average daily units sold for [product] over the last 90 days, excluding promotion periods?'*

Lead time is rarely perfectly consistent. A supplier who averages 14 days may sometimes take 10 and sometimes take 21. If you set your ROP assuming 14 days but the delivery takes 21, you stock out.

For variable lead times, use maximum lead time in your ROP calculation rather than average lead time — at least until you have enough data to calculate lead time variability precisely.

Alternatively: ROP = (Average daily sales × Average lead time) + (Average daily sales × Lead time buffer)

Where lead time buffer = the difference between your average lead time and your 90th-percentile lead time.

With inventory and sales data connected, AskBiz can:

• Calculate average daily sales per SKU automatically
• Combine with your lead times (entered manually or imported) to suggest reorder points
• Alert you when any product crosses its reorder point

Ask AskBiz: *'Based on my last 90 days of sales data, what are the suggested reorder points for my top 20 products?'* — this generates a table of suggested reorder levels that you can review and implement.

Set an inventory alert: Intelligence → Custom Alerts → Inventory below reorder point to get a notification (email or app) when any SKU hits its ROP.

Reorder points are not set-and-forget. Update them when:

• Your demand pattern changes (new sales channel, seasonal shift, product going viral)
• Your supplier lead time changes (new supplier, shipping disruption)
• You move into a new season

A quarterly review of your top 20 products' reorder points takes 30 minutes and prevents the majority of stockouts. Ask AskBiz to flag products where current average daily sales deviate by more than 25% from the sales rate used to set the ROP — these are your highest-risk miscalibrated points.