How to Calculate Reorder Points (Formula)

Most small stores reorder the same way: notice a shelf looking thin, panic-order, then discover three weeks later that two other SKUs quietly sold out while you weren't looking.

There's a better way, and it's one formula. Once you understand it, you can set it up in a spreadsheet today, or let software watch it for you. Either way, you stop guessing.

The reorder point formula

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

That's it. Three ingredients:

• Average daily sales: how many units of this SKU you sell per day, on average
• Lead time: how many days between sending the purchase order and the stock being on your shelf (production + shipping + receiving)
• Safety stock: your buffer for "sales spiked" or "the shipment was late"

When your stock level drops to the reorder point, you order. Not earlier (cash sits on shelves), not later (you stock out).

A worked example

Say you sell a candle: "Cedar & Fig, 250g."

• Average daily sales: Last 90 days you sold 450 units → 450 ÷ 90 = 5 units/day
• Lead time: Your supplier takes 10 days to produce and ship, plus 2 days to check in → 12 days
• Safety stock: You keep 30 units as a buffer (more on choosing this below)

Reorder point = (5 × 12) + 30 = 60 + 30 = 90 units

When Cedar & Fig drops to 90 units in stock, you send a PO. Done right, the new stock arrives just as the buffer starts getting used.

How to choose your safety stock number

Safety stock answers one question: how wrong can things go at once?

A simple way to set it:

• Stable seller, reliable supplier: 3–5 days of sales
• Spiky seller (viral moments, seasonality) or flaky supplier: 7–14 days of sales

In the candle example, 30 units = 6 days of sales. A middle setting. If this candle got TikTok-famous last winter and sold 3× normal for two weeks, lean toward the higher end for that SKU.

You don't need precision here: you need consistent application. A rough buffer applied to every SKU beats a perfect buffer applied to none.

The three mistakes that break reorder points

1. Using one average for the whole year. If your sales doubled in the last quarter, last year's average tells you to order half of what you need. Recalculate velocity from a recent window: 60 to 90 days works for most stores.
2. Forgetting lead time changes. Your supplier's "10 days" became 18 during their busy season. If your reorder point assumed 10, you stocked out for 8 days and never knew why. Re-check lead times with every order.
3. Setting it once, forever. Reorder points are living numbers. Sales velocity drifts, suppliers change, seasons turn. Review quarterly at minimum: monthly for your top 20% of SKUs.

All three assume the number on screen matches the number on the shelf. It often doesn't, and a wrong count feeds a bad reorder point just as surely as a wrong average does, which is why preventing inventory discrepancies is upstream of all of this.

Why stores eventually automate this

The reorder point is also one input among several: the other inventory metrics worth tracking tell you whether the stock you're reordering was the right stock to hold at all.

The formula is easy. The maintenance is the job: recalculating velocity for 200 SKUs every month, tracking each supplier's real lead time, watching every stock level against every reorder point, every day.

That's exactly the work a spreadsheet can't do for you. It holds the formula but never taps you on the shoulder. So the sequence most growing stores follow is:

1. Spreadsheet stage (works up to ~30 SKUs): formula + monthly review
2. Alert stage: software computes reorder points from live sales data and notifies you the day a SKU crosses its point
3. Decision stage: the alert arrives with the PO drafted (supplier, quantity, cost), so the task is "review and send," not "calculate and type"

If you're in stage 1, set up the formula this week. If you're feeling the pain of stage 2, that's precisely why we built StockCue: reorder alerts computed from your actual sales velocity, with the purchase order one click away.

Next in this series: Safety Stock, Explained for Small Shopify Stores.