Reorder Point
The reorder point is the inventory-position threshold that triggers a replenishment order under a defined stocking policy.
What is Reorder Point?
A reorder point answers when to order. It aims to cover demand while the new stock is on its way, with an additional buffer if uncertainty requires one. It does not by itself determine the quantity of the new order.
Inventory position commonly combines usable stock on hand and stock already ordered, less backorders or other commitments not already deducted. Counting only physical stock can trigger unnecessary repeat orders while a delivery is already in transit.
Reorder point = Expected demand during lead time + Safety stock
With stable daily demand and lead time: average daily units × lead-time days + safety stock. Keep the time units consistent and define inventory position without double-counting reservations.
Ordering before the shelf is empty
A filter cartridge sells an average of 15 units daily and takes 8 days to replenish. The store holds 30 units of safety stock. Its reorder point is 15 × 8 + 30 = 150 units. A replenishment order is triggered when inventory position reaches the threshold under the policy.
How to interpret it
The threshold allows stock to remain available during replenishment. Waiting until usable inventory reaches zero ignores the demand expected before a supplier delivery can arrive.
Lead time should cover the full interval from placing the order to stock being ready to sell, including relevant processing and receiving time. A shipping transit estimate alone may omit other delays.
In a continuous-review policy, inventory position is monitored as it changes. A periodic-review system checks at intervals and must account for the time until the next review as well as replenishment. The same simple threshold should not be transferred without adjustment.
Reorder points need refreshing when demand, supplier reliability or customer commitments change. Promotional spikes may require a different expected-demand input than a normal-period average.
Common mistakes
Using the reorder point as the order quantity
The trigger is a stock level. EOQ, a target-stock policy or another rule determines the amount replenished.
Ignoring inbound orders
Stock already on order is part of inventory position. Omitting it can repeatedly trigger replenishment for the same expected demand.