What is the reorder point (ROP) and how do you calculate it?
The reorder point (ROP) is the exact inventory level at which you need to place a new order with your supplier so new stock arrives before the shelf runs dry. Instead of guessing when to restock, a clear reorder point prevents both costly stockouts and overstocked storerooms.
Reorder point = (average daily sales × supplier lead time in days) + safety stock. When available quantity drops to this number, it is time to reorder so incoming stock lands before your reserve is used up.
The reorder point formula and its three components
Calculating a reliable reorder point requires three practical inputs: how many units you sell on an average day, how many days your supplier takes to deliver, and the safety stock buffer you keep for unexpected delays. Keep all quantities in the same unit of measure.
Always measure lead time from the day you send the purchase order to the day the goods are unpacked and ready to sell, not just the supplier's promised shipping time. Counting real receiving time keeps your threshold realistic.
- Average daily sales: the typical number of units sold per day during normal trading
- Lead time (in days): the total calendar days from placing an order to having stock on the shelf
- Safety stock: the extra buffer quantity held against late deliveries or sudden demand spikes
Reorder point vs. safety stock
Shop owners often confuse the reorder point with safety stock, yet they play distinct roles. Safety stock is the emergency cushion kept for surprises, whereas the reorder point is the trigger level that tells you to buy more now.
When your stock hits the reorder point, your shelf is not empty. It holds enough units to cover normal customer sales while the delivery truck is on the road, plus your untouched safety stock buffer.
How the Low/Critical stock field works in GiroPS
In GiroPS, your calculated reorder point goes directly into the Low/Critical stock field on each product card. Every stock-tracked item can have its own threshold tailored to its sales speed and supplier lead time.
As soon as a sales invoice or stock movement brings the quantity on hand down to that number, GiroPS triggers a low-stock notification and highlights the product in your low-stock filter. You immediately see what needs ordering without walking the aisles.
Practical scenario
Example: setting the reorder point for a staple product
A neighbourhood grocery shop sells an average of 15 bags of ground coffee per day. The wholesaler delivers orders in 4 days, and the owner keeps 20 bags as safety stock against delivery delays. Normal demand while waiting for a delivery is 15 × 4 = 60 bags. Adding the 20 bags of safety stock gives a reorder point of 60 + 20 = 80 bags. The owner enters 80 into the Critical stock field in GiroPS, so an alert appears the moment stock reaches 80 bags.
Frequently Asked Questions
Can I calculate a reorder point without safety stock?
Yes, if a local supplier delivers reliably within hours and demand is completely steady, you can set safety stock to zero and multiply daily sales by lead time. For most retail and wholesale items, however, a small buffer prevents stockouts.
Does the reorder point tell me how many units to buy?
No. The reorder point tells you 'when' to place an order. 'How much' to order depends on your cash flow, storage space, supplier minimum order quantities, and how quickly the item turns over.
Should reorder points stay fixed all year?
No. For seasonal products, raise the Critical stock threshold ahead of peak months so you do not run out, and lower it as the season winds down so you are not left with excess inventory.