Cascade Electronics Supply is a fictional company created for this example.
Cascade Electronics Supply distributes consumer electronics components and accessories — phone chargers, cables, small replacement parts — to independent electronics retailers. One of its steadier sellers is a USB-C charging cable, sold in cases of 24 units to retail customers. Below is the full reorder point calculation for that item, worked through in the same order a purchasing analyst at Cascade would actually gather the numbers.
Step 1: Average Daily Demand
Cascade’s sales system shows 12,285 units of this cable sold over the past 273 days (roughly 9 months) — a period the purchasing team confirmed was free of any one-off bulk deals that would skew the average.
Average Daily Demand = 12,285 ÷ 273 = 45 units/dayStep 2: Lead Time
The cable is sourced from an overseas manufacturer. Cascade’s purchasing records show the last six purchase orders for this item took, from order date to warehouse receipt: 8, 9, 10, 9, 8, and 10 days.
Lead Time = (8 + 9 + 10 + 9 + 8 + 10) ÷ 6 = 54 ÷ 6 = 9 daysStep 3: Safety Stock
Pulling daily sales figures for the same 273-day window, Cascade’s analyst calculates a standard deviation of 20 units/day — meaning daily sales for this cable typically land within about 20 units of the 45-unit average, in either direction. Cascade’s inventory policy targets a 95% service level for its steadier SKUs, corresponding to a Z-score of 1.65.
Safety Stock = Z × Demand Std Dev × √(Lead Time)
= 1.65 × 20 × √9
= 1.65 × 20 × 3
= 99 unitsStep 4: Reorder Point
With all three inputs gathered, the final calculation is a straight sum:
Reorder Point = (Average Daily Demand × Lead Time) + Safety Stock
= (45 × 9) + 99
= 405 + 99
= 504 unitsReading the Result
Cascade’s purchasing policy for this cable becomes: when on-hand inventory drops to 504 units, place the next order. Breaking that number down: 405 units is what Cascade expects to sell during the 9-day wait for a new shipment to arrive, under average conditions. The remaining 99 units is protection against the two things that don’t always land on average — a shipment taking a day or two longer than usual, or a stretch of higher-than-typical demand while waiting.
Checking the Order Size Separately
Reorder point tells Cascade when to order — it says nothing about how much. That’s a separate calculation entirely: Cascade uses its EOQ calculator to determine the actual order quantity for this cable based on ordering costs and holding costs, independent of the 504-unit trigger point calculated here. The two numbers work together but are never the same calculation — see EOQ vs. Reorder Point for the full relationship between them.
What This Looks Like Operationally
In practice, Cascade’s inventory system flags this cable for reorder the moment a warehouse count shows 504 units or fewer on hand. No one has to remember to check it manually, and no one has to make a judgment call under pressure about whether “we’re getting a little low” actually means it’s time to order — the threshold already answers that question.
What Happens When an Input Changes
This reorder point isn’t a number Cascade calculates once and files away. If the overseas manufacturer’s lead time stretches — say, from a shipping disruption — or if this cable’s demand grows as more retailers carry it, both the lead-time-demand term and the safety stock term shift, and the 504-unit trigger stops reflecting reality. Reorder Point Decision-Making in Practice picks up exactly this scenario — what changes, by how much, and how Cascade would recalculate.