Your reorder point is the stock level at which you must place a purchase order to avoid a stockout. Most Shopify merchants set it by feel — and stockout anyway. Here is the formula that eliminates guesswork.
The question is not "are we running low?" The question is "at what exact stock level do we need to order?"
Most merchants answer it by feel: "looks like about two weeks of stock left, probably time to reorder." The problem is that "feels like two weeks" is often wrong — and wrong in the most expensive direction, because the stockout is already happening before the order is placed.
The reorder point formula removes the guesswork. It calculates the exact stock level at which to trigger a purchase order so that the restock arrives before you run out, accounting for both your typical lead time and the variability in your demand.
Reorder Point (ROP) = (Average Daily Demand × Lead Time in Days) + Safety Stock
Three inputs:
Average Daily Demand (D): The average number of units you sell per day. Calculate this over the most recent 30–90 days, or use a demand-weighted average that accounts for seasonality.
Lead Time (LT): The number of days between placing an order with your supplier and having the stock available to fulfil customer orders. Include the full cycle: PO creation, supplier processing, production (if applicable), shipping, customs, and your own receiving time.
Safety Stock (SS): The buffer stock you hold above your expected demand-during-lead-time to protect against demand spikes and supply delays. (See our guide on calculating safety stock for the full formula.)
You sell a product at an average of 15 units per day. Your supplier's lead time is 12 days. You have calculated a safety stock of 45 units for this SKU.
ROP = (15 × 12) + 45 = 180 + 45 = 225 units
When this SKU's stock level hits 225 units, place your purchase order. If everything goes to plan, the restock arrives just as you are drawing down your safety stock buffer — and you never actually reach zero.
If demand spikes during those 12 days (you sold 20 units/day instead of 15), the safety stock absorbs the difference. If the supplier delivers a day late, safety stock covers that too.
Lead time is the most commonly underestimated input, and underestimating it is the most common reason reorder points fail.
Most merchants use the supplier's quoted lead time. That is the average in good conditions. It is not the lead time you should plan around.
Your planning lead time should include:
| Stage | Typical Time |
|---|---|
| PO creation and approval | 0.5–1 day |
| Supplier acknowledgement and processing | 1–3 days |
| Production / picking at supplier | 2–7 days |
| International shipping | 7–21 days (or 1–3 days domestic) |
| Customs clearance (if international) | 1–5 days |
| Your receiving and put-away | 0.5–2 days |
If you buy from an overseas supplier with a quoted 14-day lead time, your actual end-to-end lead time including all stages may be 18–25 days. Set your reorder point on 14 days and you will routinely stockout.
Use your actual historical lead time — measured from PO placement to stock available to ship — not your supplier's quoted time. If you do not have historical data, add 30–40% to the quoted time as a buffer until you have enough orders to calculate the real number.
The basic formula uses average daily demand. But average demand is rarely what you actually sell during any given lead time period. Some weeks you sell 10 units per day; some weeks you sell 22.
This is why safety stock exists: it absorbs the variability around the average. But your average daily demand figure should also reflect reality as accurately as possible.
For stable demand: A simple 30–90 day average is sufficient.
For trending demand (growing or declining): Weight recent sales more heavily. A product growing 20% month-over-month should use a demand figure that reflects the current growth trajectory, not a trailing average that understates current velocity.
For seasonal demand: Use the same period from prior years as your baseline and apply a seasonality multiplier. If this product sells 3× more in November than the annual average, your November reorder point should use 3× your average daily demand figure.
These are often confused:
Reorder Point: The stock level at which you place a purchase order. It is set high enough that you receive the restock before running out. It is not the minimum you want to hold — it is the trigger to prevent ever reaching the minimum.
Minimum Stock Level (Safety Stock): The buffer floor. If your stock reaches this level, something has gone wrong — either you did not order at the reorder point, or demand spiked or supply was delayed beyond the safety stock calculation's assumptions.
The reorder point sits above the minimum stock level. The gap between them is exactly your expected demand during lead time.
A reorder point is not set once and forgotten. It should be reviewed whenever:
Demand changes significantly. If a product's average daily demand increases by 30% — from a PR mention, influencer post, or seasonal shift — a reorder point calibrated to old demand will trigger too late.
Lead time changes. If your supplier moves to a new fulfilment centre, or you switch from air freight to sea freight, your lead time changes. Your reorder point must change with it.
Safety stock is recalculated. If your demand variability increases (standard deviation goes up) or supplier reliability worsens, your safety stock should increase — and therefore your reorder point should increase.
You enter a new season. Peak season demands higher reorder points. Setting Black Friday reorder points in October (not November) gives you time to receive stock before demand peaks.
Stale reorder points are as dangerous as no reorder points. A reorder point set six months ago on last year's demand data gives you false confidence — you think you have a system, but the system is calibrated to a store that no longer exists.
For a store with 50+ SKUs, manually maintaining reorder points for every product is impractical. In practice:
Tier your attention by ABC class. Review and update Class A reorder points monthly. Class B quarterly. Class C semi-annually. Your most important SKUs get the most rigorous maintenance.
Automate alerts. Set your inventory system to notify you the moment any SKU crosses its reorder point, rather than checking manually. The notification should trigger same-day action — not a "I'll get to that" mental note that results in a three-day delay.
Build PO templates. For each supplier, maintain a template with your standard order quantities (ideally at or near EOQ for each SKU). When a reorder alert fires, the PO is a two-minute task, not a 30-minute research exercise.
These three calculations are designed to work as a system:
With all three set correctly, your replenishment loop is almost automatic: stock crosses the reorder point → alert fires → PO is placed for EOQ units → stock arrives before safety stock is breached → repeat.
Most merchants operate with none of the three calculated. Even implementing just the reorder point eliminates the most common and most expensive failure: ordering too late.
Your reorder point is the single number that determines whether you stockout or not. Set it by feel and you will stockout regularly. Set it by formula and you will almost never stockout.
Calculate your average daily demand. Measure your real end-to-end lead time (not your supplier's quoted time). Add your safety stock buffer. The result tells you exactly when to order — and "when to order" is the most important inventory decision you make.
Start with your Class A SKUs. Get their reorder points right. Then work down through B and C. Each correctly set reorder point is one fewer stockout per replenishment cycle — compounding across every SKU, every order, every month.
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