Inventory Replenishment Analysis: When and How Much to Order
By My Inventory Items · Updated
How do I analyze inventory replenishment?
Estimate demand during supplier lead time, add an explicit safety buffer and compare the reorder point with inventory position. Then calculate order quantity for your target coverage, allowing for incoming stock, commitments, pack sizes and supplier constraints.
Worked examples are illustrative calculations, not customer outcomes. Tools use the inputs and definitions shown on their individual pages.
Start with actual demand and supplier lead time
Use net demand in units per day and lead time in days. Separate order processing, supplier preparation, shipping and receiving delays. Flag promotions and stockout periods: observed sales during a stockout can understate customer demand. A moving average is a baseline, not a guarantee of future sales.
Calculate the reorder trigger
Reorder point = average daily demand × lead time + safety stock. In an illustrative example, 8 units per day × 10 days + 30 buffer units = 110 units. The buffer should reflect uncertainty and service requirements; it is not automatically the same amount for every SKU.
Compare with inventory position
For this example, inventory position = usable on-hand units + confirmed incoming units − commitments not already deducted from on-hand stock. With 90 on hand, 40 incoming and 25 committed, the position is 105 units. That is below the 110-unit trigger. Check arrival dates because a late incoming order cannot prevent an earlier stockout. Deduct a commitment only once.
Calculate how much to order
For a chosen 20-day total coverage horizon from today, a target of 8 × 20 + 30 = 190 units implies an order of max(0, 190 − 105) = 85 units. If the supplier sells packs of 12, rounding up gives 96 units. Check that the horizon covers lead time and the intended review interval, then consider shelf life, storage and minimum order quantities.
Use EOQ only when its assumptions fit
EOQ = square root of (2 × annual unit demand × cost per order ÷ annual holding cost per unit). It estimates a cost-based order size under a simplified steady-demand model. It does not determine the reorder trigger, model all discounts or automatically account for expiry and variable supplier capacity.
Validate the plan after each receipt
Compare expected and actual delivery dates, quantities, demand and stockouts. Update lead time and demand assumptions when the evidence changes. Check service levels alongside holding cost so reducing stock does not hide a worsening availability problem.
Run the calculations
Frequently asked questions
Is reorder point the quantity I should order?
No. Reorder point is the trigger for reviewing or placing an order. Order quantity depends on the target stock level, inventory position, review interval and supplier constraints.
Should incoming purchase orders count as available stock?
Include confirmed incoming quantities in inventory position, while checking their arrival dates. They are not usable on-hand stock until received and checked, and delayed deliveries may not cover near-term demand.