Reorder points: when to order before you run out

When should you place the next order for an item: when the shelf looks low, or before that? A reorder point answers the question with a number. It's the stock level at which you should reorder so new product arrives before you run out. The basic formula is average daily sales times delivery lead time, plus a small safety buffer.

Once you set reorder points for your top sellers, ordering stops being guesswork.

What is a reorder point?

A reorder point is a trigger. When your stock of an item falls to that level, it's time to order more.

The idea is simple. It takes time for an order to arrive. During that time, you're still selling. The reorder point makes sure you have enough on hand to cover sales until the delivery shows up.

Set it too low and you run out before the truck arrives. Set it too high and you tie up cash and shelf space in extra stock.

How do you calculate it?

The basic formula has three parts.

Average daily sales. How many units you sell on a typical day.

Lead time. How many days between placing an order and having the product on the shelf.

Safety stock. A small buffer for busier-than-usual days or late deliveries.

Reorder point = (average daily sales × lead time) + safety stock.

Your POS sales reports give you the first number. Your supplier's schedule gives you the second. The third is a judgment call, which you can refine over time.

A worked example

Here's a hypothetical for a popular energy drink.

Your POS shows you sold 84 cans over the last 14 days. That's 84 ÷ 14 = 6 cans a day on average.

Your distributor delivers four days after you place an order. So lead time is 4 days.

During those 4 days, you'd expect to sell 6 × 4 = 24 cans.

Sales aren't perfectly steady. Some days you sell 9 or 10. So you add a safety stock of, say, 10 cans.

Reorder point = 24 + 10 = 34 cans.

When your count drops to 34, place an order. If everything goes normally, you'll have about 10 cans left when the delivery arrives.

Now say the drink is on promotion and sales jump to 10 a day. Your reorder point should rise too, to about 40 + 10 = 50. Reorder points aren't set-and-forget.

How do you use reorder points day to day?

Start with your top 20 or 30 sellers. Those are the items where running out costs the most.

Write the reorder point on the shelf tag or in your POS, if it supports reorder alerts. Some POS systems can flag items that fall below a set level.

When you do your ordering count, compare each item's stock with its reorder point. Anything at or below gets ordered.

Review the numbers every month or two. Seasons change what sells. Ice cream, hot cocoa, and umbrellas all have busy seasons.

If you use NRS POS, check what inventory and reorder reporting it offers. You can learn more at NRS POS.

Do reorder points work for store supplies too?

Yes, and they're often overlooked. Running out of receipt paper, bags, or cleaning supplies can stop business just as surely as running out of a top seller.

Here's a hypothetical. Your store uses about 3 receipt rolls a day, and supplies take 5 days to arrive. That's 15 rolls during lead time. Add a buffer of 10, and your reorder point is 25 rolls.

Tape a note inside the supply cabinet with the reorder point for each supply. When you hit it, order. For receipt rolls, browse the paper rolls category on NRS Marketplace. For bags and other counter items, check the store supplies category.