What is the reorder point formula?

ROP = (average demand per day × lead time in days) + safety stock. The first term covers expected demand while the replenishment is in transit; safety stock covers the variability around it.

What is the difference between reorder point and safety stock?

Safety stock is a buffer quantity sized from demand variability and service level. The reorder point is the inventory level that triggers an order, and it contains safety stock plus expected lead-time demand.

Should the reorder point use on-hand stock or inventory position?

Inventory position — on hand plus on order minus backorders. Comparing the trigger against on-hand stock alone causes duplicate orders whenever lead time is longer than the review interval.

How does a periodic review affect the reorder point?

If stock is reviewed every R days rather than continuously, demand must be covered over lead time plus the review period: ROP = d × (L + R) + Z × σd × √(L + R).

Does the reorder point tell me how much to order?

No. It only tells you when to order. The order quantity comes separately from an EOQ calculation, a supplier minimum, a pallet or full-truckload rounding rule, or a target coverage period.

Reorder Point Formula

The reorder point is the inventory level at which a replenishment order must be placed so that stock arrives before the shelf runs empty. It combines expected demand during lead time with the safety stock that covers variability.

Run the numbers

The calculator returns lead-time demand, safety stock and the resulting reorder point from your demand, lead time and service level.

Open the Safety Stock Calculator

Safety Stock Formula guide

The Formula

ROP = (d × L) + SS

d — average demand per period, usually per day.
L — replenishment lead time in the same periods.
SS — safety stock, typically Z × σd × √L.

Substituting the statistical safety stock model gives the complete expression:
ROP = d × L + Z × σd × √L

How the Two Terms Relate

The two halves of the reorder point answer different questions. Lead-time demand (d × L) answers “how much will I sell while I wait?” and is a pure expectation — if demand behaved exactly as forecast, it would be the whole answer and stock would reach zero precisely as the delivery arrived. Safety stock answers “how wrong can that expectation be before it costs me an order?” and is a risk decision expressed through Z.

A practical consequence: a longer lead time increases the first term proportionally to L but the second only by √L. Lead time is therefore usually the strongest single driver of the reorder point, and shortening it reduces working capital on both terms at once.

Worked Example — Continuous Review

Average daily demand: 250 units
Standard deviation of daily demand: 60 units
Lead time: 12 days
Target service level: 95% → Z = 1.65

Lead-time demand = 250 × 12 = 3,000 units.
√12 ≈ 3.464, so SS = 1.65 × 60 × 3.464 ≈ 343 units.
ROP = 3,000 + 343 = 3,343 units.

When inventory position falls to 3,343 units, the replenishment order is placed. Under average conditions about 343 units remain when the delivery lands; in a heavy demand period that buffer is consumed instead of causing a stockout.

Worked Example — Periodic Review

Suppose the same SKU is only reviewed every 7 days. Exposure now runs across lead time plus the review interval, L + R = 19 days.

Lead-time demand = 250 × 19 = 4,750 units.
√19 ≈ 4.359, so SS = 1.65 × 60 × 4.359 ≈ 432 units.
ROP = 4,750 + 432 = 5,182 units.

Reviewing weekly rather than continuously raises the trigger by more than 1,800 units for the same service level — a concrete illustration of why review frequency is an inventory decision, not just a process detail.

Use Inventory Position, Not On-Hand Stock

Inventory position = on hand + on order − backorders. If lead time exceeds the review interval, more than one order can be open at a time; comparing only on-hand stock against the trigger then places a duplicate order every cycle. This is one of the most common reorder-point implementation errors in ERP configuration.

When the Formula Needs Adjusting

Variable lead time — use SS = Z × √(L × σd² + d² × σL²).
Seasonality — use the demand rate expected during the coming lead-time window, not a flat annual average.
Intermittent demand — normal-distribution assumptions break down; a Poisson or empirical distribution fits better.
Shelf life — cap the resulting stock so the reorder point does not create expiry write-offs.
Supplier minimums — they affect order quantity, not the trigger; keep the two decisions separate.

Checking the Space Implications

Reorder point plus order quantity sets the peak inventory a SKU will reach. Run that peak through the Pallet Position Calculator and then the Storage Capacity Calculator to confirm the warehouse can hold it — a replenishment policy that has nowhere to put the stock is not a viable policy.

Safety Stock Calculator — calculates safety stock and reorder point together
Safety Stock Formula Explained
Pallet Position Calculator
Storage Capacity Calculator

Frequently Asked Questions

What is the reorder point formula?: ROP = (average demand per day × lead time in days) + safety stock. The first term covers expected demand while the replenishment is in transit; safety stock covers the variability around it.
What is the difference between reorder point and safety stock?: Safety stock is a buffer quantity sized from demand variability and service level. The reorder point is the inventory level that triggers an order, and it contains safety stock plus expected lead-time demand.
Should the reorder point use on-hand stock or inventory position?: Inventory position — on hand plus on order minus backorders. Comparing the trigger against on-hand stock alone causes duplicate orders whenever lead time is longer than the review interval.
How does a periodic review affect the reorder point?: If stock is reviewed every R days rather than continuously, demand must be covered over lead time plus the review period: ROP = d × (L + R) + Z × σd × √(L + R).
Does the reorder point tell me how much to order?: No. It only tells you when to order. The order quantity comes separately from an EOQ calculation, a supplier minimum, a pallet or full-truckload rounding rule, or a target coverage period.