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When to Reorder Stock

Selling 40 units/day with a 10-day lead time and 100 units of safety stock, reorder when inventory hits 500 units (400 lead-time demand + 100 safety). That covers the supplier delay plus a buffer for demand spikes.

Results

Visualization

Cashbizly provides illustrative business estimates only. Results depend on your inputs and assumptions and are not accounting, tax, or legal advice. Consult a CPA or financial advisor before major decisions. Tax-year figures (mileage, QBI, SEP, etc.) are labelled by year and should be verified at IRS.gov.

How It Works

Reorder Point = (Daily Demand x Lead Time) + Safety Stock. Lead-time demand is what you sell while waiting for the order; safety stock protects against demand or supply variability. This is standard inventory control and pairs with EOQ for a complete policy.

What Should You Do?

Scenario 1: a longer 20-day lead time pushes ROP to 900. Scenario 2: raising safety stock to 200 (5 days cover) protects against a demand spike. Scenario 3: if demand is volatile, base safety stock on demand variability, not a fixed number.

Frequently Asked Questions

How much safety stock?

Enough to cover demand/lead-time variability; a common rule is a few days of average demand, more for volatile items.

Does this assume constant demand?

The base formula does; safety stock is the adjustment for variability. Track actuals and tune.

How does EOQ fit?

EOQ sets how much to order; reorder point sets when. Use both together.

Authoritative References

Investopedia — Reorder Point — Reorder point and safety stock formula.
Corporate Finance Institute — Inventory — Inventory control basics.