Reorder Point Calculator
Calculate reorder point with or without safety stock, using demand, lead time, and service level. Avoid stockouts while keeping inventory lean.
Reorder Point Inputs
Results
What is reorder point?
The reorder point (ROP) is the inventory level at which you should place a new purchase order so that the new shipment arrives before you run out of stock. It connects three things:
- Average demand (how fast you sell or consume an item)
- Lead time (how long suppliers take to deliver)
- Safety stock (extra buffer to absorb variability)
Reorder point formulas
1. Basic reorder point (no safety stock)
Formula
\[ \text{ROP} = d \times L \]
where:
- \( d \) = average demand per period (e.g. units per day)
- \( L \) = lead time in the same periods (e.g. days)
2. Reorder point with safety stock
Formula
\[ \text{ROP} = d \times L + \text{Safety stock} \]
3. Safety stock with variable demand and lead time
When both demand and lead time are uncertain, a common model is:
Step 1 – Standard deviation of demand during lead time
\[ \sigma_{LT} = \sqrt{L \cdot \sigma_d^2 + d^2 \cdot \sigma_L^2} \]
where:
- \( \sigma_d \) = standard deviation of demand per period
- \( \sigma_L \) = standard deviation of lead time (in periods)
Step 2 – Safety stock
\[ \text{Safety stock} = Z \cdot \sigma_{LT} \]
Step 3 – Reorder point
\[ \text{ROP} = d \cdot L + Z \cdot \sigma_{LT} \]
Typical Z-values for service level
| Service level | Z-value |
|---|---|
| 90% | 1.28 |
| 95% | 1.65 |
| 97.5% | 1.96 |
| 99% | 2.33 |
Worked example
Suppose you sell a spare part with:
- Average demand \( d = 40 \) units per week
- Average lead time \( L = 3 \) weeks
- Demand standard deviation \( \sigma_d = 10 \) units per week
- Lead time standard deviation \( \sigma_L = 0.5 \) weeks
- Target service level = 95% → \( Z \approx 1.65 \)
1. Demand during lead time
\[ d \cdot L = 40 \times 3 = 120 \text{ units} \]
2. Standard deviation during lead time
\[ \sigma_{LT} = \sqrt{3 \cdot 10^2 + 40^2 \cdot 0.5^2} = \sqrt{3 \cdot 100 + 1600 \cdot 0.25} = \sqrt{300 + 400} = \sqrt{700} \approx 26.46 \]
3. Safety stock
\[ \text{Safety stock} = 1.65 \times 26.46 \approx 43.7 \approx 44 \text{ units} \]
4. Reorder point
\[ \text{ROP} = 120 + 44 = 164 \text{ units} \]
So you should reorder when on-hand inventory drops to about 164 units.
Best practices for setting reorder points
- Use consistent time units: if demand is per day, convert lead time to days.
- Segment items: critical or high-margin items usually deserve higher service levels (and higher safety stock).
- Review regularly: update demand, lead time, and service levels when conditions change.
- Combine with EOQ or order-up-to policies: ROP tells you when to order; EOQ or min/max policies tell you how much to order.
Reorder Point FAQ
Is reorder point the same as safety stock?
No. Safety stock is the extra buffer inventory you keep to absorb variability. Reorder point is the total inventory level at which you trigger a new order: demand during lead time plus safety stock.
What happens if my reorder point is too low?
If ROP is too low, you will place orders too late and are more likely to stock out during lead time. This can cause lost sales, production downtime, or rush shipping costs.
What if my demand is highly seasonal?
For seasonal items, calculate reorder points separately for each season or use a rolling demand forecast instead of a single long-term average. The formulas still apply, but the inputs should reflect the current season.
Can I use this calculator for make-to-order items?
Reorder point logic is most useful for stocked items (make-to-stock). For pure make-to-order items with no finished-goods inventory, you typically manage capacity and lead time rather than reorder points.