The Number That Decides Whether You Stock Out
A reorder point is a single number. When your inventory drops to that number, you place a new order. Get it right and new stock arrives just as you need it. Get it wrong and you either stock out or over-order.
I have watched sellers lose weeks of sales over a lead time they entered once and never updated. The supplier got slower, the reorder point stayed the same, and by the time they placed the order it was already too late.
Ordering late is not a rare problem. A worldwide retail study by Daniel Corsten and Thomas Gruen, Stock-Outs Cause Walkouts in Harvard Business Review, found an average out-of-stock rate of about 8%. Most of those gaps trace back to store-level ordering and forecasting, not supplier failures. A reorder point you keep current is the cheapest guard against landing in that 8%.
The formula is simple. The discipline of keeping it current is the hard part.
The Formula
Reorder Point = (Average Daily Sales x Lead Time) + Safety Stock
Or shorter:
ROP = Lead Time Demand + Safety Stock
Three components. Each one requires real data, not guesses.
Average Daily Sales
How many units do you sell per day? Pull real numbers:
Average Daily Sales = Units Sold / Number of Days
Example:
Last 30 days: 300 units sold
Average Daily Sales: 300 / 30 = 10 units/day
Use 30-90 days of data for stable products. Adjust for seasonality, because your December velocity is not your March velocity. And exclude one-time bulk orders that would skew the average. I had a B2B order for 200 units throw off my velocity calculation for a month until I caught it.
Lead Time
Lead time is not just "how long shipping takes." It is every day between placing the order and having inventory ready to sell:
Supplier processing: 3 days
Ocean shipping: 25 days
Customs/port: 5 days
Receiving: 2 days
Total Lead Time: 35 days
For FBA sellers, add FBA processing time. That can be 3-14 days depending on the season and fulfillment center backlog. During Q4 check-in delays, I have seen FBA receiving take three weeks.
Safety Stock
This is your buffer against the unexpected. Demand spikes, shipping delays, supplier problems. The detailed math is in our safety stock calculation guide. For a quick starting point:
Safety Stock = Average Daily Sales x Safety Days
Safety Stock = 10 units x 14 days = 140 units
Two weeks of buffer works for most products with stable demand and reliable suppliers. Higher variability or longer lead times warrant more.
Where to Get Each Input
Garbage in, garbage out. I have seen sellers plug in a gut-feel number for daily sales and wonder why they keep stocking out. Pull real data instead.
Average daily sales. In Shopify, go to Analytics, then Sales by product, and divide the total units sold by the number of days in the range. On Amazon, the Business Reports detail page gives you units ordered by day. Use the last 30 to 90 days unless demand has shifted recently; a new ad campaign or a seasonal ramp makes older data misleading.
Lead time. Ask your supplier what their current turnaround is, not what it was six months ago. Add transit days. If you ship ocean freight, add port delays. The number you want is order placed to stock available, not manufacturing time alone.
Safety stock. If you do not have a number, run the safety stock calculator first. It accounts for demand variability and lead time uncertainty so you are not guessing a buffer.
Putting It Together
With our example numbers:
Average Daily Sales: 10 units
Lead Time: 35 days
Safety Stock: 140 units
Reorder Point = (10 x 35) + 140
Reorder Point = 350 + 140
Reorder Point = 490 units
When you have 490 units, place your next order. Not 500. Not "soon." 490.
Worked Examples
Shopify store with domestic supplier
Selling 5 units/day. US supplier with 7-day lead time. You want 1 week of safety stock.
Lead Time Demand: 5 x 7 = 35 units
Safety Stock: 5 x 7 = 35 units
Reorder Point: 35 + 35 = 70 units
Reorder at 70 units. With a domestic supplier this tight, you could even run with 5 days of safety stock and reorder at 60. The risk is low because a late domestic shipment is 2-3 days, not 2-3 weeks.
Amazon FBA with overseas supplier
Selling 20 units/day. China supplier with 45-day lead time. FBA receiving adds 7 days. You want 2 weeks of safety stock.
Total Lead Time: 45 + 7 = 52 days
Lead Time Demand: 20 x 52 = 1,040 units
Safety Stock: 20 x 14 = 280 units
Reorder Point: 1,040 + 280 = 1,320 units
Reorder at 1,320 units. That is a lot of inventory to maintain, which is why overseas sourcing with FBA requires significant capital. At $8 per unit cost, you need $10,560 worth of inventory just to hit the reorder trigger.
Multi-channel seller
Selling 8 units/day on Shopify and 12 units/day on Amazon. Shared warehouse with 21-day lead time. You want 2 weeks of safety stock.
Combined Daily Sales: 8 + 12 = 20 units
Lead Time Demand: 20 x 21 = 420 units
Safety Stock: 20 x 14 = 280 units
Reorder Point: 420 + 280 = 700 units
Reorder at 700 combined units across both channels. For more on multi-channel math, see our guide on multi-channel inventory challenges.
Quick Reference
| Daily Sales | Lead Time | Safety Days | Reorder Point |
|---|---|---|---|
| 5 units | 7 days | 7 | 70 units |
| 10 units | 14 days | 14 | 280 units |
| 10 units | 30 days | 14 | 440 units |
| 20 units | 45 days | 14 | 1,180 units |
| 50 units | 60 days | 14 | 3,700 units |
The jump from domestic to overseas suppliers is stark. A 7-day lead time needs 70 units at the trigger. A 60-day lead time needs 3,700. This is why lead time accuracy matters so much. A 10% error on a 60-day lead time is 6 days. At 50 units a day, that is 300 units wrong.
Static vs. Dynamic Reorder Points
Static reorder points get set once and reviewed periodically. They work for products with stable demand and reliable suppliers. Most sellers start here.
Dynamic reorder points recalculate automatically as your sales velocity changes. If your product starts selling 15 units per day instead of 10, the reorder point adjusts without you touching a spreadsheet. This is better. Significantly better. I switched from static to dynamic and caught two potential stockouts in the first month that my old fixed numbers would have missed.
The catch: dynamic reorder points require software. Spreadsheets can do it but you need to update velocity calculations frequently and remember to propagate changes. Which you will not do on your busiest week.
Five Mistakes That Cause Stockouts
Forgetting lead time components. Lead time is not just ocean shipping. Include supplier processing, manufacturing, all transit, customs, receiving, and FBA processing. Map your entire supply chain timeline end to end. I missed customs delays for six months until I started tracking actual receipt dates against PO dates.
Using old sales data. A velocity from six months ago does not reflect today's demand. Use the most recent 30-90 days, adjusted for trends you can see.
Ignoring seasonality. Your reorder point for November should be different from June. If Q4 is 3x your normal velocity, your reorder point needs to reflect that before November starts.
Running without safety stock. Zero buffer means any deviation - demand spike, late shipment, anything - results in a stockout. Always include safety stock. The question is how much, not whether.
Setting and forgetting. Demand changes. Suppliers change. Lead times shift. Review reorder points quarterly, or whenever you see a significant change in velocity or supplier performance.
Reading the Result
The number the calculator returns is a trigger, not a schedule. When on-hand inventory for this SKU hits that level, place your next order. Set it as a low-stock alert in whatever system you use: Shopify notifications, an FBA restock alert, or a dedicated inventory tool. Recalculate at least monthly, and raise it before peak seasons, when daily sales climb and supplier lead times stretch.
When This Calculator Fits, and When It Does Not
It works well for SKUs with steady demand and a supplier you order from as needed. I use it for bread-and-butter products where last month's sales are a fair proxy for next month.
It is the wrong tool for highly seasonal SKUs where daily sales swing 5x between peak and off-peak. Those need a demand forecast that shifts the inputs over time, not a static snapshot. It also will not help with one-time buys like limited editions or liquidation inventory. And if you order on a fixed schedule (every Tuesday, first of the month), you are on a periodic review model. Timing is fixed and quantity varies. That is a different calculation.
Automating the Math
The reorder point formula is simple enough to run in a spreadsheet. The problem is doing it for 100+ SKUs and keeping the inputs current. Most sellers start with a spreadsheet and keep it up for a few months. Then the catalog grows past what hand tracking can hold, and the updates stop.
You can hand the check to software. An AI agent connected to your inventory data watches every SKU against its reorder point and alerts you the moment one crosses it.
We built ReplenishRadar to handle this automatically. It reads your velocity from recent sales. It tracks real lead times from PO history, not the number you typed once. It moves your reorder points as the data moves. When a SKU hits its reorder point, you get an alert with a suggested order quantity. No spreadsheet to forget to update on a Friday afternoon before a holiday weekend.
The formula fits in one line. Keeping it current across the whole catalog is the hard part. It separates sellers who reorder on time from sellers who find out two weeks late.