Business Glossary
What Is a Reorder Point?
A reorder point (ROP) is the stock level at which to place a new supplier order, calculated to ensure stock arrives before you run out. Getting reorder points right eliminates stockouts without carrying excess inventory.
The Formula
Reorder Point = (Average Daily Sales × Supplier Lead Time) + Safety Stock
Worked Example — UK SME
A UK distributor sells 22 units/day. Lead time: 14 days. Safety stock (3 days): 66 units. Reorder point = (22 × 14) + 66 = 374 units. Place the order when stock drops to 374.
UK Benchmark
📊 Set safety stock at 3–7 days of average sales depending on supplier reliability and the commercial impact of a stockout. Review reorder points whenever lead times or sales velocity change significantly.
Common Questions
How do I set safety stock levels?
Safety stock should reflect the cost of a stockout. For a best-seller driving 20% of revenue, 7 days of safety stock is cheap insurance. For slow-moving lines, 1–2 days is sufficient.
What is the difference between reorder point and minimum stock?
Reorder point accounts for lead time and gives better results than a fixed minimum level. Static reorder points set years ago are a common cause of both stockouts and overstock.
How often should I review reorder points?
Whenever supplier lead times change, when sales velocity changes seasonally, or when you introduce a new supplier.
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