Running out of a critical part stops work. Overstocking ties up budget and shelf space. A reorder point is a simple tool for finding the balance: it tells you when to order an item so new stock arrives before you run out.
What a reorder point is
A reorder point is the stock level that triggers a new order. When the quantity on hand drops to that level, you reorder. It depends on two things: how quickly you use the item and how long it takes to replace.
The basic formula
Reorder point = (average daily usage × lead time in days) + safety stock
Illustrative example: an item used about 4 times per workday, with a 10-workday lead time and 20 units of safety stock, has a reorder point of (4 × 10) + 20 = 60. When the count reaches 60, place the order.
Choosing safety stock
Safety stock covers the unexpected: a usage spike, a late shipment or a miscount. There is no single right number. A practical starting point:
- Critical items that stop work when missing: carry more safety stock
- Items with long or unreliable lead times: carry more
- Inexpensive, easy-to-find items: carry less or order more often
- Rarely used items: consider ordering only when needed
Start with a reasonable estimate, then adjust based on what actually happens.
Minimum and maximum levels
Many teams use min/max levels. The minimum works like a reorder point. The maximum sets how high to restock, which keeps orders consistent and prevents overbuying. The order quantity is the maximum minus what is on hand, rounded to the package size.
Where to start
- List the items that cause the most disruption when they run out
- Pull recent usage history, or track usage for a few weeks if records are incomplete
- Confirm current lead times with suppliers
- Set reorder points for those items first, then expand
- Label bins or shelves with the reorder point so anyone can see when to reorder
Keep reorder points current
Usage and lead times change. Review reorder points on a regular schedule, such as quarterly, and whenever you see repeated stockouts, rush orders or items that sit untouched.
Accurate counts matter too. A reorder point only works when the inventory record matches what is actually on the shelf.
Moss Holm’s inventory and purchasing reviews include suggested reorder points for agreed items. Request a project discussion to talk through your stockroom.