Inventory guide
Reorder Point and Safety Stock Explained
Avoid stockouts by combining demand, supplier lead time and a realistic buffer.
The basic reorder point
Reorder point equals expected demand during supplier lead time plus safety stock. If a SKU sells 12 units per day, replenishment takes eight days and safety stock is 30 units, the reorder point is 126 units.
Use available stock carefully
Compare the reorder point with stock available to promise, not only units physically on a shelf. Subtract committed orders and damaged units, then include confirmed inbound inventory only when its arrival is reliable.
Choose a buffer from real variation
Safety stock should reflect changes in demand and lead time rather than a convenient round number. Seasonal products may need a forward-looking sales rate. Long lead-time imports require attention to production delay, port congestion and receiving time as well as transit.
Test the numbers
Use your own current costs and keep a dated note for every marketplace fee, carrier rule or operating assumption that may change.