Reorder Point & Safety Stock Calculator
Enter demand history, supplier lead-time variation, a cycle-service target, and ordering costs to estimate when to reorder a SKU. The result shows the reorder point, statistical safety stock, EOQ, and the inventory cost implied by those settings.
Reorder point273
- Expected lead-time demand
- 200
- Safety stock
- 73
- Recommended order quantity
- 442
- Reorder status
- 11.3 operating days until reorder
- Days of safety-stock coverage
- 3.64
- Estimated orders per year
- 16.55
- Average inventory
- 293.43
- Estimated annual ordering and holding cost
- $1,542.09
Assumes independent demand and lead time, normally distributed lead-time demand, and EOQ conditions.
Safety stock, reorder point, and order quantity are rounded up for displayed unit counts.
How to use this calculator
- Enter average daily demand and the standard deviation of daily demand for the SKU.
- Enter the average supplier lead time and its standard deviation in operating days.
- Choose a target cycle-service level, then add operating days, ordering cost, and holding cost.
- Compare the reorder point with your current inventory position to decide whether to order now.
How the reorder point is calculated
A reorder point is the inventory position that should trigger a replenishment order. Inventory position means on-hand inventory plus open purchase orders minus backorders. This calculator estimates the demand expected during supplier lead time, then adds statistical safety stock for demand and lead-time variation.
The lead-time demand model is:
sigmaDL = sqrt(L × sigmaD^2 + d^2 × sigmaL^2)
safety stock = z × sigmaDL
reorder point = d × L + safety stock
- d is average daily demand.
- sigmaD is the standard deviation of daily demand.
- L is average supplier lead time in operating days.
- sigmaL is the standard deviation of supplier lead time.
- z is the standard-normal score for the target cycle-service level.
The tool rounds the displayed safety stock and reorder point up to whole units because a buyer cannot usually order a fraction of a unit. It keeps the unrounded statistical values for the cost calculations.
How the order quantity and cost are estimated
The recommended order quantity is the economic order quantity:
Q = sqrt(2 × D × S / H)
D is annual demand, S is the cost to place one order, and H is annual holding cost per unit. Estimated orders per year are D / Q. Average inventory is Q / 2 + safety stock. The annual ordering and holding cost is (D / Q) × S + (Q / 2 + safety stock) × H.
What moves the result most
Lead-time variability can dominate the reorder point when demand is steady but suppliers are inconsistent. Demand variability matters more when average lead time is long because more uncertain days are being covered. Raising the cycle-service level from 95% to 99% increases the z-score sharply, so safety stock rises faster than many teams expect.
EOQ moves in the opposite direction from holding cost. Higher order setup cost favors larger, less frequent orders. Higher holding cost favors smaller orders, while the reorder point itself is driven by demand, lead time, and the chosen service target.
What this calculator leaves out
The model assumes demand and lead time are independent and that lead-time demand is reasonably approximated by a normal distribution. It does not model seasonality, trends, promotions, intermittent demand, supplier allocation, correlated delays, multiple open orders, stockout cost, quantity discounts, minimum order quantities, case packs, shelf life, warehouse capacity, or contractual order multiples.
Worked example
Suppose a SKU sells 20 units per operating day, with a daily-demand standard deviation of 6 units. The supplier averages 10 operating days of lead time, with a lead-time standard deviation of 2 days, and the target cycle-service level is 95%.
Expected lead-time demand is 20 × 10, or 200 units. The lead-time demand standard deviation is sqrt(10 × 6^2 + 20^2 × 2^2), or about 44.27 units. A 95% cycle-service level uses a z-score of about 1.645, so safety stock is about 72.82 units and displays as 73 units. The reorder point is 200 + 72.82, so it displays as 273 units.
With 365 operating days per year, a $40 ordering cost, and a $3 annual holding cost per unit, annual demand is 7,300 units and EOQ is about 441.2 units, displayed as 442 units. If the current inventory position is 500 units, the trigger is about 11.4 operating days away.
Common questions
What is the difference between safety stock and a reorder point?
Safety stock is the extra inventory held to absorb uncertain demand or supplier timing. The reorder point is the full trigger level: expected demand during lead time plus safety stock. A SKU can have zero safety stock and still need a reorder point if demand occurs during lead time.
How do I calculate daily-demand standard deviation?
Use historical daily demand in the same operating-day calendar used for the average. Calculate the sample standard deviation of those daily quantities after removing days that should not count, such as closed days or known data outages. For seasonal items, calculate it from a comparable season or use a separate forecast process.
Should inventory already on order count toward the reorder point?
Yes, compare the reorder point with inventory position, not only on-hand stock. Inventory position is on-hand units plus units already on order minus backorders. This prevents duplicate orders when a replenishment order is already in the pipeline.
What service level should I use for inventory?
A higher cycle-service level reduces the chance of a stockout during a replenishment cycle, but it increases safety stock. Many teams use higher service levels for high-margin, critical, or hard-to-substitute SKUs and lower levels for slow movers or products with acceptable substitutes. The right target depends on stockout cost, holding cost, supplier reliability, and customer expectations.
Why is cycle-service level different from fill rate?
Cycle-service level is the probability that a replenishment cycle has no stockout. Fill rate measures the share of units demanded that can be filled immediately from stock. A SKU can have a high fill rate even if some cycles stock out, especially when the shortage quantity is small.
How often should reorder points be recalculated?
Recalculate whenever demand, supplier performance, cost, or service targets materially change. For active SKUs, a monthly or quarterly review is common, with faster review after promotions, assortment changes, supplier disruption, or a sustained forecast miss.