When to reorder stock: the reorder point formula, with a free calculator
Reorder when the stock you have left will only last as long as your supplier takes to deliver, plus a safety margin. As a formula: reorder point = units sold a day × delivery days × 1.2, where 1.2 is a 20% safety margin. An item that sells 4 a day from a supplier who takes 10 days should be reordered when 48 are left.
Reorder point calculator
Where do the numbers come from?
- Units sold a day: take the last 30 days of sales for that item and divide by 30. Leave out days when it was out of stock, or the average comes out too low.
- Delivery days: from the day you place the order to the day the stock is on your shelf, including transit and the time you take to check it.
- Safety margin: extra for the week sales jump or the supplier is late. 20% is a sensible start.
Why add a safety margin?
Without one, you reorder exactly on time only if nothing goes wrong. Sales rise before festivals and suppliers are late in the wedding season. Raise the margin for best sellers and festival months, and lower it for slow items where running out costs little.
How much should I order?
At least the supplier's minimum order. Beyond that, it is a trade-off: bigger orders mean fewer orders to place but more money sitting on shelves; smaller orders mean the opposite. If placing an order costs you little and stock ties up cash, order smaller and more often.
Mistakes small shops make
- Averaging over days when the item was sold out.
- One reorder point for a product sold in six sizes. M and L run out long before XXL; each size needs its own.
- Forgetting festival demand until the week of the festival.
- Counting the supplier's dispatch date, not the day stock is on the shelf.
Letting the app do it
One Tap Manager's stock reordering works this out for every item from your own sales, warns you before stock runs out and drafts the purchase order. It is on the Max plan at ₹999 a month (free on every account during the launch period).
Common questions
What is a reorder point?
The stock level at which you place the next order, so new stock arrives before the old runs out.
What is safety stock?
Extra stock kept for the days sales run higher or the supplier is late. In the formula here it is the 20% margin.
What is lead time?
The days from placing an order to having the stock ready to sell.