Reorder point

There is a stock level at which you place the next order, early enough that the new delivery arrives before the shelf is empty. It is the stock that will be sold while you wait for the supplier, plus a cushion for surprises. When the count falls to that level, you order. That level is called the reorder point.

The formula is average daily sales multiplied by lead time, plus safety stock. It only works if the count is right and the lead time is real, which is why it sits on top of good stock control. Review the numbers when sales or the supplier's speed change, for instance at the start of a season.

The reorder point says when to order, not how much. How much depends on price breaks, storage space and cash, and is a separate decision (the economic order quantity is one way to think about it).