You know how much you’d like to order. You might even have a safety buffer calculated. But there’s still one question neither of those answers: with stock ticking down every day, exactly when do you actually pull the trigger on the next order?
That’s the question a reorder point exists to answer.
The Short Definition
A reorder point is the inventory level at which you place a new order, set so that the order arrives before you run out. It’s not a quantity you order — it’s a threshold you watch for. When on-hand inventory drops to that number, the answer to “should I reorder now?” becomes a simple yes or no, instead of a judgment call made under pressure.
The Trigger, Not the Order Size
This is the single most important thing to get right about reorder point: it tells you when, not how much. Reaching your reorder point doesn’t tell you whether to order 50 units or 5,000 — that’s a completely separate question, answered by Economic Order Quantity. And a reorder point isn’t just “average demand during the wait for a new order” either — it includes a deliberate buffer on top, for the same reason a buffer is needed anywhere in inventory: demand and lead time don’t always land exactly on their average. That buffer is Safety Stock, calculated separately and then combined into the reorder point.
Put together: Safety Stock answers “how much buffer,” EOQ answers “how much to order,” and Reorder Point answers “when to order” — using the safety stock figure as one of its own inputs. Two existing articles cover the first two relationships in full depth already: EOQ vs. Reorder Point and Safety Stock vs. Reorder Point — worth reading if you want the complete comparison rather than the short version here.
Why This Matters in Practice
Without a defined reorder point, “when do we order more?” tends to get answered one of two bad ways: too late, noticed only after a customer order can’t be filled, or too early, out of caution, tying up cash in inventory sooner than necessary. A calculated reorder point turns that decision into something a purchasing system — or a person glancing at a stock report — can execute mechanically, without re-litigating the timing every single time.
Try It Yourself
The fastest way to see this in action is to plug your own average daily demand, lead time, and safety stock into the Reorder Point Calculator and watch the trigger point come out the other end. From there, Reorder Point Formula Explained covers exactly how those three numbers combine, and How to Calculate Reorder Point: Step-by-Step walks through gathering each one from your own operation.