Zansa › Answers › Forecasting and data science
What is a reorder point and how do I calculate it?
A reorder point is the stock level at which you place a new order so that stock lasts until the delivery arrives. A common formula is average daily demand multiplied by supplier lead time in days, plus safety stock. When on-hand plus on-order stock falls to that number, you reorder.
Example with no real data: if you sell about 10 units a day, lead time is 7 days and you hold 20 units of safety stock, the reorder point is 10 x 7 + 20 = 90 units.
The formula assumes demand and lead time are reasonably stable. If either varies a lot, safety stock needs to be larger. Count stock already ordered but not yet received, or you will double order. Review the figures regularly, since demand seasonality changes the right reorder point through the year.
Want this applied to your business? Zansa builds dashboards and forecasts for small and mid-sized companies worldwide. Start with a free intro call.
Book a call