Say you stock a part that your supplier has always delivered in about a week. Someone set the reorder point years ago with that in mind, and it\u2019s been sitting there ever since. Then deliveries start slipping. Ten days. Twelve. One order takes fifteen. Your shelf is empty by day nine, a customer is waiting, and somebody in purchasing is on the phone begging for a rush shipment.<\/p>\n
Most of the time, the math behind the reorder point is fine. The number feeding it just got old. So let\u2019s talk about how to work out a reorder point when your supplier\u2019s delivery time keeps changing, and how to keep checking it so you don\u2019t get caught out.<\/p>\n
A reorder point is the stock level that tells you it\u2019s time to look at buying more. Once your on-hand stock drops to that level, you review the item and decide on an order.<\/p>\n
Here\u2019s the basic formula:<\/p>\n
Reorder Point = (Average Daily Demand \u00d7 Average Lead Time) + Safety Stock<\/strong><\/p>\n Think of it as two pieces. The first is what you expect to sell while you wait for the delivery. The second, safety stock, is the extra you keep for the days when things go sideways.<\/p>\n People often mix this up with order quantity. The reorder point answers \u201cwhen.\u201d Order quantity answers \u201chow many.\u201d<\/p>\n In your system, lead time looks like one clean number. In the real world it wobbles, usually for a few familiar reasons:<\/p>\n Left alone, this leads to stockouts, rushed buying, piles of extra stock that tie up cash, and promises to customers that you can\u2019t keep.<\/p>\n I\u2019ll be honest, though: no reorder point can save you from every delay. If a supplier ships weeks late, that hurts whatever number you picked. What you can control is whether your numbers match reality.<\/p>\n Start with the formula above, then go through four steps.<\/p>\n Divide the units you sold or used by the number of days in that period. If you sold 1,800 units in 90 days, that\u2019s 20 a day. Pick a period that makes sense for the item. Something seasonal needs a different window than something that sells the same amount all year.<\/p>\n Pull up your past purchase orders and compare the order date with the receipt date. That gap is your real lead time. A supplier\u2019s quoted lead time is a fine starting point, but it\u2019s usually the best case.<\/p>\n Two items can both average 10 days. If one always lands between 9 and 11 days, and the other bounces anywhere from 5 to 20, they shouldn\u2019t get the same safety stock. The average hides the swing, so look at both.<\/p>\n Think about how much your demand moves, how much your lead time moves, and how often you\u2019re willing to run out. That last one is your service level. The simple formula gets you started. The best method depends on how your own demand and supply behave.<\/p>\n Why Changing Supplier Lead Times Make Reordering Difficult<\/h3>\n
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How to Calculate a Reorder Point When Lead Times Vary<\/h3>\n
Step 1: Find your average daily demand<\/h4>\n
Step 2: Check what suppliers actually delivered<\/h4>\n
Step 3: Notice how much lead time swings<\/h4>\n
Step 4: Set a safety stock that fits the item<\/h4>\n