Work out exactly how low a product's stock should get before you place the next order — low enough to avoid tying up cash, high enough to avoid running out.
Formula used: Reorder Point = (Average Daily Usage × Lead Time in Days) + Safety Stock. This is a standard inventory planning formula — adjust the safety stock figure based on how variable your demand or supplier delivery times actually are.
A reorder point is the stock level at which you place your next order with a supplier. Set it too low and you run out while waiting for the delivery; set it too high and cash sits on the shelf as stock you didn't need yet. The right number covers what you'll sell during the supplier's lead time, plus a buffer for surprises.
Reorder point = (average daily usage × lead time in days) + safety stock. Average daily usage is how many units you sell or use on a typical day. Lead time is the number of days between placing an order and the stock arriving. Safety stock is extra stock held to cover a slow delivery or a busier-than-usual week.
A shop sells an average of 12 units a day, the supplier takes 7 days to deliver, and the owner keeps 10 units as safety stock. The reorder point is (12 × 7) + 10 = 94 units. When stock on hand drops to 94, it's time to place the next order — which is the example already filled in above.
Reorder points matter most for retail businesses keeping shelves stocked and wholesale and distribution businesses managing long supplier lead times.
BizFlare tracks stock levels in real time and alerts you before you run out — no spreadsheet needed.