Reorder points: how to set minimum stock levels that actually work
Stock management · 29 April 2026 · 7 min read
A reorder point is the stock level at which you place a new order for a product. Get it right and you almost never sell out, and you almost never overstock. Get it wrong — or don't set one at all — and you're permanently reacting to empty shelves.
The good news: the maths is simple, and you only need to do it properly for your important lines.
The formula
Reorder point = (daily sales × lead time in days) + safety stock
Three parts:
- Daily sales: average units sold per day. Weekly sales divided by seven is fine.
- Lead time: days between placing an order and the stock being on the shelf. Include your own delays — if the delivery sits in the stockroom for a day before anyone works it, that's part of the lead time.
- Safety stock: a buffer for the weeks when sales spike or the delivery is late.
A worked example
Say you sell 35 cans of a popular energy drink per week — that's 5 a day. Your wholesaler delivers two days after you order. So during the lead time you'll sell about 10 cans.
For safety stock, a simple rule of thumb is half your lead time demand, more if the supplier is unreliable or sales are spiky. Call it 5 cans.
Reorder point = 10 + 5 = 15 cans. When stock hits 15, you order. You'll receive the new delivery around the time you're down to your last few — without ever showing customers an empty shelf.
How much safety stock is right?
Think about two risks:
- Demand risk: does this product sell steadily (milk) or in bursts (barbecue charcoal on the first sunny weekend)? Spiky products need more buffer.
- Supply risk: does the supplier ever short-deliver or skip a drop? Unreliable suppliers need more buffer.
For a steady seller from a reliable supplier, 25–50% of lead time demand is plenty. For a spiky seller from a patchy supplier, you might want 100% or more — or a backup supplier.
Don't set reorder points for everything
Setting and maintaining reorder points for 2,000 products is a job nobody will keep up with. Use the 80/20 rule: roughly 20% of your range drives 80% of your sales. Set proper reorder points for that 20% — typically your top 200–400 lines — and order the rest on a simple weekly look-and-fill.
The products that justify the effort are the ones where a sell-out genuinely costs you: milk, bread, tobacco, top soft drinks, best-selling alcohol, anything a regular customer comes in specifically to buy.
Review them quarterly
Sales rates change. The energy drink doing 35 a week in April might do 60 a week in July. A reorder point set once and never revisited slowly becomes wrong. Put a quarterly reminder in: pull the latest sales rates for your key lines and adjust.
The shortcut
This is exactly the job low-stock alerts in inventory software are designed to do. You set the minimum once, the system watches stock levels as sales go through, and it tells you the day a product crosses its reorder point. The thinking in this article still matters — software can't know your lead times or how spiky a product is — but it removes the daily checking entirely.