Reorder Point
Definition
The stock level at which you need to place a new purchase order so it arrives before you run out.
Want a deeper explanation?
Formula
Reorder Point = (Average Daily Units Sold × Lead Time in Days) + Safety StockA reorder point turns reordering from a gut call into a rule. When stock hits the number, you place the order, which protects your rankings from stockouts without overbuying.
It needs updating as sales speed or lead times change, especially around peak season. Watch for: reorder points that have not been revisited since last year, because a busier season will run you out of stock.
Example
Selling 40 units a day with a 45-day lead time and 400 units of safety stock means reordering when stock hits 2,200 units.