Definition
A reorder point is the stock level at which you place an order for more of a product, so the delivery arrives before you run out.
The formula
- Average daily sales: units sold over a recent period, divided by the days you were open.
- Lead time: days from deciding to order until the stock is on the shelf.
- Safety stock: a cushion for busy days and late deliveries.
A worked example
You sell about 6 bags of rice a day. The supplier delivers 4 days after you order. You keep 8 bags as a cushion. Reorder point = 6 x 4 + 8 = 32 bags. When the shelf and back room hold 32, it is time to order.
Why it matters in a small shop
Without a written number, reordering happens when the shelf looks thin, which is too late for fast sellers and too early for slow ones. A reorder point per product gives you and your staff a clear line to check against. The reorder point calculator does the arithmetic, and the full guide covers safety stock and seasons.
Related terms
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