What is a reorder point?
The reorder point is the stock level that starts a new purchase order. When the stock on hand falls to this level, you order, and the new stock arrives before the old stock runs out.
It covers the demand during the lead time, plus the safety stock. A fixed reorder point is correct only while demand and lead time stay the same, so recalculate it when either one changes.
The formula
Reorder point = (average daily demand × average lead time in days) + safety stock
- Use the same unit for demand and safety stock, for example tubs.
A worked example
Cold Craft, Madagascar Vanilla 500ml tub
- Average demand is 40 tubs a day, and the lead time is 9 days.
- Demand during the lead time is 40 × 9 = 360 tubs.
- The safety stock is 207 tubs.
The reorder point is 360 + 207 = 567 tubs. When the stock falls to 567 tubs, place the next order.
Reorder point in Miridia
Miridia stores a reorder point and a reorder quantity for each product at each location, and it can draft purchase orders when stock falls below the reorder point. Miridia Planner recalculates reorder points from the forecast.