Determine the stock level at which a replenishment order should be placed to avoid stockouts.
Reorder Point
450 units
Lead Time Demand
350 units
Safety Stock
100 units
Daily Demand
50 units
Formula Used
(Daily Demand × Lead Time) + Safety Stock
(Daily Demand × Lead Time) + Safety Stock
The reorder point is the inventory level that triggers a new order. It covers expected demand during lead time plus a buffer for variability.
A store sells 50 units per day. Lead time from the supplier is 7 days, and safety stock is 100 units. Reorder Point = (50 × 7) + 100 = 450 units. When stock falls to 450 units, place the next order.
Use historical demand variability and a desired service level (e.g., 95%) with the safety stock formula.
Yes. Use realistic average lead time observed historically, not the supplier-promised lead time.
At least quarterly, and any time lead time or demand shifts significantly.
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