Reorder Point Calculator

The formula

Reorder point is the stock level that triggers your next purchase order. It has two parts — what you will sell while waiting, plus a cushion:

Safety stock = (Max daily usage × Max lead time) − (Average daily usage × Average lead time)

Reorder point = (Average daily usage × Average lead time) + Safety stock

With the defaults: you sell 12 a day and your supplier takes 14 days, so 168 units cover a normal wait. The bad case is 20 a day for 21 days, or 420 units. Safety stock is the difference, 252, and the reorder point is 420. When stock hits 420, you order — because that is the level from which you survive a simultaneously busy month and late shipment.

The number other reorder calculators leave out

Safety stock is insurance, and insurance has a price. At $6.50 landed, 252 units of safety stock is $1,638 of your cash sitting in a warehouse doing nothing until something goes wrong. That is money you cannot spend on advertising, on a new product, or on a larger order at a better unit price.

This is the real trade-off in inventory, and it is a cash decision rather than a logistics one. A large buffer means you never disappoint a customer and your working capital is permanently locked up. A thin buffer frees cash and means one late container costs you a stockout. Neither is correct in general; what is incorrect is choosing without knowing the price.

What a stockout actually costs

Weighed against that cash, the cost of running out is worse than the lost orders on the day, particularly on marketplaces:

• Ranking damage. Marketplace search tends to favour listings that reliably convert. An out-of-stock listing converts at zero, and recovery after reinstating stock is usually slower than the outage itself.
• Advertising already spent. Traffic you paid to acquire arrives at a listing that cannot sell. That budget is simply gone.
• The customer buys from a competitor — and if the competitor is adequate, that is a customer you have permanently transferred rather than temporarily lost.

Reduce lead time before you increase stock

Notice what the formula rewards. Safety stock is driven by the gap between your normal and worst case, not by your sales volume. Narrowing that gap — a supplier who is reliably 14 days rather than sometimes 21, or a second supplier for emergencies — shrinks the buffer you need and releases the cash, without any increase in stockout risk. Negotiating consistency is nearly always cheaper than financing a bigger buffer.

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