A reorder point is a decision rule: when stock reaches this number, order again. It should be written where the order is made, not buried in a document.
Estimate lead time
Write the number of working days between placing an order and having usable stock. Include receiving and checking, not just shipping.
Estimate normal usage
Use a recent average, not the busiest week. If demand is seasonal, keep a separate note for the busy period.
Add a safety margin
The margin covers a late delivery or a short spike. It can be a few days of usage, not a guess at the maximum possible demand.
Review the trigger
Check the point monthly and after a supply change. A reorder point that is never reviewed becomes a stale rule.
Reorder point
| Item | Example |
|---|---|
| Lead time | 5 working days |
| Daily usage | 3 units |
| Safety margin | 2 days |
| Reorder point | 21 units |
What to watch for
- Using the busiest week as normal usage.
- Forgetting receiving time in the lead time.
- Setting a point without an owner.
A useful next step
Write the calculation beside the trigger. When demand changes, change one input and recalculate rather than guessing a new number. With a five-day lead time and three units used per day, the example needs fifteen units just to cover normal demand. The reorder point of twenty-one adds six units of safety stock—two extra days—rather than a guess at the maximum possible spike. If the lead time changes, recalculate the demand portion before changing the safety stock. Write the lead time and daily use on the reorder card. Review the trigger after two deliveries and adjust only the safety stock.