How to calculate a reorder point
Your reorder point is the stock level at which you place your next order, so new stock arrives just as the old runs out. It has two parts: the units you'll sell while you wait for the order, and a safety buffer for busy days and late deliveries.
Reorder point = Average daily sales × Average lead time + Safety stock
Safety stock = (Highest daily sales × Longest lead time) − (Average daily sales × Average lead time)
This max–average method needs only numbers you already have in your sales reports, which makes it the most practical choice for small sellers. Larger operations often use a statistical version based on the standard deviation of demand and a chosen service level.
Worked example
You sell 20 units a day on average and up to 30 on busy days. Your supplier usually delivers in 14 days but has taken 21. You'll sell 280 units during a normal lead time (20 × 14). Safety stock is 30 × 21 − 280 = 350 units, so your reorder point is 630 units. With 900 in stock, you have about two weeks before you need to reorder, and an order that covers 30 days of sales after it arrives is 600 units.
Why sellers run out of stock
- Using the average lead time only. One late shipment wipes out a month of sales rank. Safety stock is what covers it.
- Forgetting receiving time. For Amazon FBA, stock isn't sellable until it's checked in, which can add one to three weeks in busy seasons.
- Not updating daily sales before peaks. Use expected Q4 sales, not your yearly average, when you reorder in September and October.
Too much safety stock costs money too
Every unit of safety stock is cash tied up and, on Amazon or Walmart fulfillment, a monthly storage fee. If your supplier is reliable, measure your actual longest lead time over the last six orders rather than guessing high.
Frequently asked questions
What is a reorder point?
The reorder point is the inventory level at which you should place a new order, so that new stock arrives before you run out. It equals average daily sales multiplied by lead time, plus safety stock.
How do you calculate safety stock?
A simple method is (highest daily sales × longest lead time) − (average daily sales × average lead time). It covers both a spike in demand and a late delivery, using numbers from your own sales and supplier history.
What lead time should Amazon FBA sellers use?
Use the total time from placing the order with your supplier until the units are available to sell on Amazon: production, freight, delivery to the fulfillment center and check-in. Check-in alone can take one to three weeks at peak times.
How much should I order each time?
Order enough to cover your sales for the period until your next order, plus any shortfall against your reorder point. This calculator shows the quantity that covers your chosen number of days after the order arrives.
How often should I recalculate my reorder point?
Recalculate whenever your daily sales or supplier lead time changes noticeably, and always before seasonal peaks such as Q4.