How to Calculate Reorder Points (So You Stop Running Out of Your Best Sellers)

Running out of a product that's selling well is one of the most expensive mistakes a distributor can make. The demand is there. The customers want it. And you simply don't have it on the shelf — so the sale goes to someone else.

The frustrating part is that this is almost always preventable. It usually doesn't come from a sudden, unforeseeable spike in demand. It comes from not knowing your own stock position accurately enough to reorder at the right time.

The number that prevents it is the reorder point. Here's how it works, and why getting it right is harder than the formula makes it look.

What a reorder point actually is

A reorder point is the inventory level at which you place a new order. When stock for a product drops to that number, it's time to reorder — not before, and critically, not after.

It answers one question: how low can this product get before I need to reorder so the new stock arrives before I run out?

That depends on two things — how fast the product sells, and how long your supplier takes to deliver.

The formula

Reorder Point = (Average Daily Sales × Lead Time in Days) + Safety Stock

There are two parts to it. The first is demand during lead time: how many units you'll sell while you wait for the new order to arrive. The second is safety stock: a buffer for the days demand runs hot or the supplier runs late.

A worked example

Say you distribute a product that sells an average of 50 units per day, and your supplier's lead time is 10 days.

Demand during lead time is 50 × 10 = 500 units. If sales and supply were perfectly predictable, you'd reorder when stock hit 500.

But they're never perfectly predictable. Some weeks you sell 70 a day. Sometimes the supplier slips to 14 days. Those are exactly the moments a too-low reorder point causes a stockout.

Safety stock covers that. A simple way to size it:

Safety Stock = (Max Daily Sales × Max Lead Time) − (Average Daily Sales × Average Lead Time)

Using the numbers above: (70 × 14) − (50 × 10) = 980 − 500 = 480 units.

So the reorder point becomes 500 + 480 = 980 units. When this product drops to 980, you reorder — early enough to absorb a bad week without running dry.

Where it actually breaks: the stock number you're trusting is wrong

Here's the part most guides skip. The formula above is only as good as the inventory number you plug into it. And for a lot of distributors, that number lives in a manually maintained spreadsheet — which is where the real damage happens.

I worked with a distributor who had a product that was genuinely selling well. The demand was there. But they kept under-supplying it, and they couldn't understand why their forecast didn't match what the market was actually doing.

The problem wasn't demand. It was their stock tracking. Inventory was being maintained by hand in Excel — stock coming in and going out wasn't captured automatically, so the numbers always lagged reality. On top of that, the spreadsheet had formula errors quietly throwing the figures off further. The result was a stock picture that looked accurate but wasn't. Their reorder decisions were built on numbers that were both out of date and miscalculated.

So they ordered as if demand were lower than it really was. They ran lean on a product the market wanted more of, and the missed sales added up — opportunities lost not because they couldn't meet demand, but because their own data told them the wrong story.

We fixed it by moving them off manual tracking to a system that captures stock movement automatically. Now the numbers update in real time, the formula errors are gone, and stakeholders can see their true stock position whenever they need it — which means reorder decisions are finally based on what's actually happening, not on a spreadsheet that's three steps behind.

The real lesson

A reorder point isn't a number you calculate once and forget. Average daily sales shift with seasonality. Lead times move as suppliers speed up or slow down. And the whole calculation collapses if the underlying stock data is wrong — whether from lag, manual entry, or a broken formula nobody caught.

That's the gap between knowing the formula and running on it. Most distributors understand roughly how reorder points work. Far fewer have accurate, real-time inventory data feeding those calculations across every SKU. The math is the easy part. Trustworthy data flowing into it automatically is what actually keeps you in stock.

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If you're managing inventory in spreadsheets — and especially if your forecasts keep missing in ways you can't explain — the cause is often in the data, not the demand. That's what our free data audit is for: we review your current setup and show you exactly where the gaps are, no obligation.