Glossary
What is a reorder point? Formula, example and common mistakes
Reorder point: A reorder point is the stock level that triggers a new order: usage over the lead time plus safety stock.
Reorder point = average daily usage x lead time in days + safety stock
By Roufaida Bouchamha, founder
The definition
The reorder point (ROP) is the stock level at which a new replenishment order should be placed so that it arrives before stock runs out. When stock on hand plus open orders falls below it, the ERP or the planner triggers a new order.
How to calculate it
- Average daily usage over a consistent window.
- Lead time in days, as the supplier delivers today.
- Safety stock to absorb variability in usage and lead time.
- Multiply usage by lead time and add safety stock.
Illustrative example, not a customer result
A part uses 25 units a day, the supplier delivers in 20 days and safety stock is 150 units. The reorder point is 25 x 20 + 150 = 650 units.
Common mistakes
- Old lead times: the reorder point was set years ago and the supplier now needs longer (see lead-time drift).
- Old usage: volume changed but the reorder point did not.
- One safety stock rule for every part, regardless of value or variability.
- Reading the below-reorder-point report alone: it tells you what to buy, not what to look at first. Sort it by days of cover.
Reorder point and shortage risk
Being below reorder point is a signal to order, not proof of a problem. A part is a shortage risk only if supply will arrive after cover runs out. The morning routine in parts below reorder point shows how to separate the two in 20 minutes.
How WERISCO uses it
WERISCO produces a ranked list of parts below reorder point, shortest cover first, from your own export, and shows where reorder points were set for lead times your suppliers no longer quote. It does not optimize your inventory policy or change your ERP; your team decides.
Questions people ask
- What is the difference between reorder point and safety stock?
- Safety stock is the buffer inside the reorder point. The reorder point also includes the stock needed to cover usage during the lead time.
- Should open orders count when comparing with the reorder point?
- Yes. Most systems compare stock on hand plus open orders with the reorder point, otherwise they would order again for quantities already on the way.
- How often should reorder points be reviewed?
- Whenever lead time or usage changes materially, and at least quarterly for important parts.
