The reorder point is the stock level at which you place a new order so the goods arrive before the shelf runs empty. This reorder point calculator sits alongside two linked tools: safety stock, which protects you from swings in sales and late suppliers, and economic order quantity, which sets the size of each order. Whatever you type in one tab carries into the other two, and the chart traces the stock level with your numbers. The examples follow a store and a restaurant in Saudi Arabia, with costs in riyals.
How to calculate the reorder point
Multiply how much of the item goes out each day by the number of days between placing an order and the goods reaching the warehouse, then add safety stock. The result rounds up to a whole unit, because half a carton does not prevent a stock-out.
ROP = d × L + SS
How to calculate safety stock
Safety stock is a quantity held back to cover a day when the store sells more than usual, or an order that turns up late. The calculator offers two methods:
- Peak usage and longest lead time: peak daily usage × longest lead time, minus average usage × average lead time. Your sales history and supplier invoices are enough to fill it in.
- Target service level: the Z factor for the service level × the standard deviation of daily usage × the square root of lead time. A 95% service level means stock lasts through 95 order cycles out of 100.
SS = dmax × Lmax − d × L · SS = Z × σd × √L
The first method assumes the worst sales day and the worst delay happen together, so it gives the larger figure. If your supplier is sometimes late, advanced settings add a field for the standard deviation of lead time, which feeds into the second formula.
Economic order quantity (EOQ)
Economic order quantity is the order size at which what you pay each year to place orders equals what you pay to hold the stock, so their total is as low as it gets. Many small orders push up ordering cost; a few large ones push up storage cost and tie up cash.
EOQ = √(2 × D × S ÷ H)
The formula assumes steady demand all year and a price that does not change with order size. If the supplier gives quantity discounts, or sales are seasonal, as they are in the Saudi market around Ramadan and back to school, work out each season separately. In restaurants, shelf life caps the quantity before the formula does: never order more than will be used before it spoils.
Common mistakes with reorder points and EOQ
- Counting lead time from the day the supplier ships, when it should run from the day you place the order to the day the goods are in the warehouse and ready to sell. If the supplier is outside the Kingdom, add the days for sea freight and customs clearance.
- Using an annual average for a seasonal item, so stock piles up after the season and runs out at its peak.
- Leaving holding cost at zero or close to it, which produces a huge order quantity. Put rent, insurance, spoilage and the cost of tied-up cash into it.
- Comparing the reorder point with stock on hand alone, when open orders that have not arrived count too.
What to do after the result
Write the reorder point and safety stock on the item card or on the shelf itself, and review them every quarter or whenever the supplier changes. To apply the calculation across your item list, download the result as an Excel file: it holds the same formulas in cells, so you copy the row for each item and change its numbers.
When items run into the hundreds
Working out one item takes a minute. With hundreds, daily usage shifts every week, lead times differ by supplier, and nobody checks stock against the reorder point every morning, so one item runs out while another piles up. At Microtec we offer retailers and wholesalers in Saudi Arabia an ERP accounting system covering purchasing, inventory, sales and finance, so each item's movements and its supplier sit in one place. Load the items that run out most often into the trial.