The Reorder Point Formula, Explained With Real Store Numbers
August 2026 · 7 min read
Most stockouts aren't caused by surprises. They're caused by reordering when stock looks low instead of when the math says it's low — because "looks low" ignores the one number that matters: how long your supplier takes to deliver.
The formula
Three ingredients, all knowable from data you already have:
- Daily sales velocity — units sold per day, averaged over a recent window (60 days is a good default; exclude cancelled orders and refunded units, which aren't demand).
- Supplier lead time — days from placing the PO to stock on your shelf. Not the quoted time: the actual time, from your own order history.
- Safety stock days — your cushion for demand spikes and late trucks. 7 days suits most retail; more for volatile sellers or flaky suppliers.
A worked example
A candle store sells 3 units/day of its bestseller. The supplier takes 14 days. Safety cushion: 7 days.
Most merchants' instinct is to reorder around 10–20 units — which means the order goes in when there's less than a week of stock left, the supplier needs two weeks, and the shelf sits empty for seven-plus days of missed sales. At 3 units/day and $30 each, that's ~$700 of revenue gone, on one product, every cycle it happens.
How much to order
Coverage days is how long you want the order to last (30 is a common default). The last term is the one everybody forgets: subtract what's already inbound on open POs. Skipping it is how stores double-order — the classic cash-flow self-inflicted wound.
The three mistakes that break the math
- Threshold alerts instead of reorder points. "Alert me under 10 units" treats every product and supplier the same. A 2-day-lead-time item and a 30-day one need wildly different triggers.
- Stale velocity. Using last year's pace, or counting refunded and cancelled units as demand, inflates or starves the math. Use a rolling recent window.
- Ignoring inbound stock. See above. If your suggested quantity doesn't subtract open POs, it's not a suggestion, it's a guess.
Spreadsheet or software?
Everything on this page works in a spreadsheet — genuinely. If you carry a dozen SKUs and enjoy updating velocity numbers weekly, build the sheet and pay nobody.
The spreadsheet fails at scale and freshness: fifty SKUs across multiple suppliers with velocities that shift every week is a part-time job. That's the entire reason Restockly exists: it runs exactly this formula continuously against your live Shopify sales — real velocity, per-supplier lead times, inbound stock subtracted — and turns the answers into purchase orders you can send. $19/month flat, 14-day trial. And if you're choosing tools, our honest guide to every PO app includes the free options.