How do I calculate a reorder point before stock runs out?
A reorder point is a stock level that prompts another order, set from use, supply time and how they vary. It must leave stock for the work due before delivery. A sign shop with 30 kits uses ten daily and waits three days: ordering Monday covers Thursday; ordering Tuesday leaves Thursday ten kits short, though the supplier is on time.
An on-time delivery can still arrive too late for your work. The ordering date decides when that delivery will reach you. A large order tomorrow cannot fill an empty shelf today.
Separate stock available now from stock on order
For the sign shop, usable stock means kits it can allocate to the planned installations now. The purchase order belongs beside its expected arrival date, not in today's usable count. Damaged kits or kits already committed elsewhere would need separate treatment; this example has neither.
The two histories differ only in when the shop orders. Supplier performance is identical. This isolates the waiting interval without claiming that all shortages have the same cause.
Monday's order covers Thursday. Tuesday's does not.
A sign shop starts Monday with 30 usable mounting kits. It needs ten each business day. Its supplier takes three business days: an order placed before work on Monday arrives before Thursday's work; one placed before work on Tuesday arrives before Friday's work.
In either case, the shop uses ten kits on Monday, ten on Tuesday and ten on Wednesday. By Wednesday evening, all 30 are gone.
If it ordered Monday, replenishment arrives before Thursday's ten installations. If it waited until Tuesday, Thursday begins with no kits. Ten installations lack their required kits even though the supplier will arrive exactly when promised on Friday.
The lesson is to compare available stock with the work due before arrival. Ordering more units does not remove the wait. These are two alternative histories for the same shop, not two orders placed together.
- Fictional fixed demand of ten kits per business day; no holidays, damaged stock, other reservations, substitutions or other receipts.
- Orders and receipts happen before that day's use. The replenishment contains at least the ten kits needed on its arrival day.
- The comparison ends on Thursday. It does not assume how Friday's delivery or delayed jobs are handled.
| Day | Order on Monday | Order on Tuesday |
|---|---|---|
| Monday | 30; order placed | 30; no order yet |
| Tuesday | 20; order in transit | 20; order placed |
| Wednesday | 10; order in transit | 10; order in transit |
| Thursday | Receipt before work covers ten needed kits | 0; ten kits needed, arrival is Friday |
Try it with your own numbers
Units you can use for planned work now. Leave out damaged units, units already promised elsewhere and anything still on order. The calculator assumes no other delivery arrives first.
Planned use on each business day. The calculator assumes the same use every day.
From placing the order to usable stock before work, as the supplier promises.
0 if you order before work today, 1 if you order before work on the next business day.
Your result
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A reorder trigger must leave time for the wait
A reorder point is a stock level that prompts another order. Australian government guidance connects it to use and supply time, with demand changes and supplier reliability also considered. A trigger only helps if it is noticed and acted on in time.
The sign shop's fixed ten-kits-a-day schedule makes the gap clear. Real use, delivery dates and inspection delays can vary. Extra stock may cover some variation, but costs money and space and can expire. These example quantities are not a recommended buffer.
Common misconceptions
- The supplier was on time, so supply cannot be the problem.
- Here the supplier met the promised interval in both cases. The later order left a gap before arrival.
- We have plenty on order, so today's jobs are covered.
- An order records an expected receipt; confirm its date and quantity. It does not establish that kits are available for Thursday. Compare dates as well as quantities.
- Ordering when we open the last box is always safe.
- That works only if the usable contents actually cover the wait and the trigger is noticed soon enough. The box label alone cannot establish this.
Check one item's next waiting interval
Put its usable stock beside the dated work that needs it and each confirmed receipt. Check for a gap before arrival. If there is one, verify whether earlier supply, a suitable alternative or rescheduling is feasible. Then review when you notice the reorder trigger and when you can actually place the order.
Sources
- Australian Government: Manage your inventory (opens in a new tab)Setting reorder points from use, supply time and relevant variation; checking actual stock. Its simple example is not an optimal-stock or service-level guarantee.