Step 1
Calculate a practical reorder point
A basic reorder point adds demand during supplier lead time to safety stock. Use consistent time units: daily demand should be paired with lead time in days. Treat the calculation as a starting estimate and review it when sales or delivery times change.
- Estimate average demand over a representative period.
- Measure the time between ordering and usable receipt.
- Add a buffer for demand or delivery uncertainty.
Step 2
Decide which quantity triggers action
An alert based only on physical stock may ignore reservations or incoming orders. Define whether your workflow uses on-hand, available or inventory position. Check the threshold controls and notification channels available in your account.
- Choose the stock measure used for the threshold.
- Record a threshold for each relevant product and location.
- Assign a person responsible for reviewing the purchasing signal.
Step 3
Review alerts before placing another order
An alert is a reason to investigate, not always an instruction to buy. Check open supplier orders, stock in another location and unusual recent demand. Avoid ordering twice for the same shortage.
- Review confirmed incoming quantities and expected dates.
- Check whether a transfer can cover the shortage.
- Adjust thresholds after material demand or lead-time changes.
Worked example
Example: calculate the threshold
Average demand is 6 units per day, lead time is 5 days and safety stock is 10 units. The reorder point is 6 × 5 + 10 = 40 units. If an order is already on its way, review its timing before buying more.
Illustrative example; use your own transaction data.
Frequently asked questions
Is a reorder point the same as an order quantity?
No. The reorder point indicates when to review replenishment. The order quantity determines how much to buy, considering minimum quantities, pack sizes, cost and expected demand.
Why am I getting too many alerts?
Check stale thresholds, duplicate responsibilities, stock reservations and open purchase orders. Review whether the threshold reflects current demand and supplier lead time.