Reorder point: the number that stops you running out

A reorder point is the level at which an item has to be ordered so that the new stock arrives before the old runs out. It is the most useful piece of arithmetic in a stockroom and almost nobody calculates it — ordering happens when a shelf looks empty, which means it happens too late by exactly the length of the supplier's lead time.

Calculating a reorder point

• Take average usage per day for the item, measured over a period long enough to include a quiet week and a busy one.
• Multiply it by the supplier lead time in days — the real one, measured from your own order history rather than the quoted one.
• Add a buffer for variation in both: demand that spikes and deliveries that slip.
• That total is the reorder point. When stock falls to it, the order goes out, regardless of how full the shelf looks.
• Recalculate when usage changes materially or when the supplier changes, since both inputs decay quietly.

How much buffer to hold

Enough to cover the variation you actually see, not the worst case you can imagine. The honest way to size it is to look at the spread in your own history: if lead time is usually ten days but has twice been eighteen, the buffer needs to cover eight days of usage rather than a round guess. Buffer is cash sitting on a shelf, so it belongs where running out is expensive — items that stop production, items with a long lead time, items a customer will not wait for — and not spread evenly across everything in the room.

Use your measured lead time, never the quoted one. Suppliers quote their intention and deliver their history, and the gap between the two is where stockouts live. Three or four past orders are enough to see the difference.

Why one number per item is not enough

Because demand is often seasonal and lead times move. A reorder point set in a quiet month will leave you short in the busy one, which is the commonest failure of a system that was correct when somebody built it. Either review the numbers each quarter for the items that matter, or set a seasonal pair for the handful where the swing is large. The rest can sit on an annual review, because for most items being slightly wrong costs nothing.

Making it work in practice

1. Start with the twenty items that cause the most disruption when they run out, not with the whole catalogue.
2. Put the reorder point in the same place as the stock figure, so the comparison is visible rather than calculated.
3. Decide who places the order when the level is reached, because a trigger with no owner is a trigger that waits.
4. Record stockouts when they happen with the item and the cause — late delivery or late ordering are different problems.
5. Check the counted figure is trustworthy first; a reorder point calculated against a wrong stock number is worse than no system.

Ettex Sheets holds the usage, lead time, buffer and resulting level per item, so the list of things to order today is a filter rather than a walk round the stockroom. The stock figure itself has to come from counting, and a rolling count keeps it honest without closing anything down.