Reorder Point
A reorder point is the stock level that triggers a new purchase order. When a SKU drops to its reorder point, you order more, timed so fresh stock arrives before you run out. It's the line between healthy inventory and a stockout.
What a Reorder Point Is
A reorder point is a number you set per SKU: the on-hand level at which you place your next order. Hit that level and it's time to reorder, no debate. The whole idea is to buy at the right moment — not so early that you drown in stock, and not so late that you sell out before the replacement lands.
The math is simple and worth knowing. Reorder point equals your average daily sales times your supplier lead time, plus your safety stock. If you sell 20 units a day, your supplier takes 14 days, and you keep 100 units of buffer, your reorder point is (20 × 14) + 100 = 380 units. When that SKU drops to 380, you order.
Two inputs drive it: how fast the SKU sells and how long replacement takes. Both move, so a reorder point isn't set-and-forget. When sales climb or a supplier's lead time stretches, the number has to climb with them, or you'll keep hitting stockouts even though your "trigger" is working exactly as set.
How Reorder Points Work in Fulfillment
Reorder points depend on knowing your true on-hand stock in real time, which is where fulfillment ties in. Your 3PL's inventory counts are the source of truth for when a SKU crosses its trigger. If those counts lag or drift, your reorder point fires late and you stock out anyway. Accurate, live inventory data is what makes the whole system work.
Lead time is the other half, and it covers more than supplier ship time. There's also the receiving gap: the time between stock hitting your 3PL's dock and being counted, put away, and available to ship. A reorder point that only accounts for the supplier's ship time but ignores dock-to-available time will run short. The safe version builds in both, so "in the warehouse" means "ready to sell," not "sitting on the receiving floor."
This is why the receiving conversation matters. Knowing how fast your 3PL turns inbound stock into sellable inventory lets you set reorder points that actually hold. At Simpl, ecommerce fulfillment includes receiving inbound stock and putting it away so it's live in your counts, and orders in by 12pm CT ship the same day.
When Reorder Points Need Recalculating
A reorder point is only as good as the inputs behind it, and those change. Revisit the number when:
- Sales velocity shifts, up for a trending SKU or down as demand cools
- A supplier's lead time changes, especially if it gets longer
- You head into a seasonal peak and daily sales jump
- You change suppliers and the new one ships on a different timeline
- You keep stocking out on a SKU despite the reorder point working as set
The last one is the clearest signal that your inputs are stale. If the trigger fires on schedule but you still run dry, either your sales estimate is low or your true lead time — supplier plus receiving — is longer than you assumed. Recalculate with real numbers and the stockouts stop.
Common Questions About Reorder Points
What is a reorder point?
A reorder point is the inventory level that tells you to place a new order for a SKU. When on-hand stock drops to that level, you reorder, timed so replacement stock arrives before you sell out.
How do you calculate a reorder point?
Multiply average daily sales by supplier lead time, then add safety stock. Sell 20 a day, with a 14-day lead time and 100 units of buffer, and your reorder point is 380 units. Reorder when the SKU hits that level.
What's the difference between a reorder point and safety stock?
Safety stock is the buffer you hold to cover surprises. A reorder point is the trigger level that tells you when to buy, and it includes your safety stock plus the stock you expect to sell during the lead time.
Why do I keep stocking out even with a reorder point set?
Usually the inputs are stale. Sales may have climbed, or your real lead time — supplier ship time plus receiving and put-away at your 3PL — is longer than you assumed. Recalculate with current numbers and build in dock-to-available time.
Related terms
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