Why do we need the reorder point calculator?
Don't know when to reorder? Afraid of shortages and overstock? We're here to help - our reorder point calculator tells you precisely when to order a new batch of items. 🛍️
Suppose you still don't feel confident about the subject. In that case, follow our article below - we'll explain everything you need to know about the reorder level, inventory replenishment formula. We're also going to teach you how to calculate the re-order point (aka reorder level of inventory).
What is the reorder point?
Reorder point is all about the number of items you currently have in your inventory - reorder level tells you the perfect time to reorder more items, based on your stock level.
Reorder point is exceptionally crucial in areas that deal with easily perishable products, such as food. Incorrectly issued orders may result in massive overstock, product spoilage, and tremendous loss of money. 💸
On the other hand, some people may want to save a little bit, ordering fewer products than they really need. Of course, such a situation will end in lower income and customer dissatisfaction that may have a massive impact on your enterprise.
Still hungry for knowledge? Check our other sales tools:
How to use the reorder point calculator?
Reorder point calculations (also called ROP calculations) are based on a few fundamental definitions:
Basic stock 📦
Basic stock is the typical number of items you have, enough to satisfy customers' demands at any moment. It must be maintained to guarantee the continuity of sales. In this calculator, we ask you for your basic stock's worth in days, weeks, or months - that is, for how long your typical stock lasts.
Safety stock 🗄️
Safety stock is an extra portion of items, bought and kept to prepare for extraordinary circumstances. In this calculator, we ask you about your safety stock's worth in days, weeks, or months.
It's reasonable to keep it to a moderate level. However, in some situations, it may bring you a gorgeous pile of extra cash (imagine a safety stock full of masks and hand sanitizers right before the Covid-19 pandemic hit).
Lead time ⏱️
Lead time is a period of time between you ordering the product and the product arriving finally at your doorsteps. In some fields, it might be one of the most critical issues to think about - delivery can take weeks or even months.
Unit sales 🎁
Unit sales describes how many items of a given sort you usually sell within a period of time. In this calculator, we ask you how many products you can sell in a range of time periods - use the dropdown menu to select your preferred period.
Wanna know more? Calculate and discover the economic order quantity (EOQ).
How to calculate the reorder point for inventory?
The optimal reorder point formula (ROP formula) is as follows:
Reorder point = (Safety stock + Basic stock + Lead time) * Unit sales
- Safety stock - is given in days;
- Basic stock - is given in days;
- Lead time - is given in days; and
- Unit sales - are given in items per day.
Let's work on a reorder level of inventory example:
We're a shop that sells bottles of beer 🍺. Our basic stock lasts for 10 days, our safety stock is only 2 days, and the lead time is 1 day. We usually sell 10 bottles of beer per day.
We're going to obtain an answer for both of the following questions:
- What is our reorder point?
- How to calculate reorder point for inventory, step-by-step?
Reorder point = (2 + 10 + 1) * 10 = 130
Our reorder points is equal to 130. It means that we need to reorder when we got 130 beers left in our inventory.
Happy with your results? Check your ending inventory's worth. 🤑