How to Calculate Reorder Point: Formula & Examples for E-commerce
Running out of stock too early means lost sales. Reordering too late risks empty shelves and unhappy customers. On the other hand, ordering too early ties up precious cash in excess inventory.
That’s where the Reorder Point (ROP) comes in. By calculating reorder points for each product, you’ll know exactly when to place your next order — ensuring smooth operations and better cash flow.
In this guide, we’ll break down what reorder point means, the formula, real examples, and how to apply it in your e-commerce business.
What Is a Reorder Point?
A reorder point (ROP) is the stock level at which you need to place a new purchase order to avoid running out of inventory before the next delivery arrives.
It acts as a trigger that tells you: “Order more now, or risk stockouts.”
Reorder Point vs. Reorder Level
These two terms are often used interchangeably, but there’s a subtle distinction:
Reorder Point: The exact stock level where you reorder (based on demand and lead time).
Reorder Level: A preset minimum stock threshold used in broader inventory systems.
📌 For more details, see our dedicated Reorder Level Formula guide.
The Reorder Point Formula
The most widely used formula for ROP is:
Let’s break this down:
Average Daily Demand (ADD) = how many units you sell per day.
Lead Time (LT) = how long (in days) it takes for new stock to arrive from your supplier.
Safety Stock = extra buffer inventory to protect against demand spikes or supply delays.
Example: Calculating Reorder Point Step by Step
Imagine you run a Shopify store selling fitness supplements.
Average Daily Demand (ADD): 50 units/day
Lead Time (LT): 7 days
Safety Stock: 200 units
Step 1: Multiply average daily demand by lead time
50 × 7 = 350
Step 2: Add safety stock
350 + 200 = 550
✅ Your reorder point = 550 units.
This means you should place a new order whenever stock for this product drops to 550 units.
The Role of Safety Stock
Safety stock is critical. It protects you against:
Higher-than-expected demand.
Supplier delays.
Seasonal spikes.
Safety Stock Formula
Safety Stock = (Max Daily Usage × Max Lead Time) − (Average Daily Usage × Average Lead Time)
Example:
Max daily usage = 70 units
Max lead time = 10 days
Average daily usage = 50 units
Average lead time = 7 days
Safety Stock = (70 × 10) − (50 × 7)
Safety Stock = 700 − 350
Safety Stock = 350 units
This calculation ensures you carry enough buffer inventory to avoid disruption.
When to Adjust Your Reorder Point
Reorder points are not static. They should be reviewed regularly to adapt to changing conditions. Key times to adjust include:
Seasonality: holidays, sales peaks, weather changes.
Promotions: marketing campaigns or discounts that boost sales.
Supplier performance: if lead times get longer or less reliable.
Multi-channel sales: Shopify, Amazon, and retail demand combined.
New product lifecycle: demand patterns often shift over time.
Tools for Calculating Reorder Point
Many businesses begin with manual calculations but quickly realize automation is more efficient.
1. Excel / Google Sheets
Good starting point.
Simple to set up but error-prone at scale.
Check out our Demand Forecasting in Excel guide.
2. ERP or Inventory Management Systems
Built-in reorder calculations.
Useful for larger operations, but often expensive and complex.
3. AI-Powered Forecasting Tools (like Verve AI)
Connects directly to Shopify.
Auto-calculates reorder points at the SKU level.
Adjusts for seasonality, safety stock, and lead times.
Saves time and reduces human error.
📌 Learn more about the bigger picture in our Inventory Forecasting and Planning guide.
Best Practices for Setting Reorder Points
Keep data clean: ensure SKUs, sales history, and supplier lead times are accurate.
Review regularly: update ROPs quarterly or before peak seasons.
Segment SKUs: fast-moving items may need tighter ROPs than slow movers.
Account for variability: add safety stock where demand is unpredictable.
Automate where possible: use AI or inventory software to reduce manual work.
Common Mistakes to Avoid
Ignoring safety stock in the formula.
Using outdated lead times from suppliers.
Applying one reorder point across multiple SKUs.
Not adjusting for promotions or seasonal demand.
Waiting until stock is too low to reorder.
Conclusion
Calculating reorder points is a simple but powerful way to prevent stockouts, avoid overstocking, and keep your e-commerce operations running smoothly.
By using the formula:
Reorder Point = (Average Daily Demand × Lead Time) + Safety Stock
… you can make smarter, data-driven purchasing decisions.
Instead of juggling spreadsheets, modern tools like Verve AI automate reorder point calculations, helping Shopify merchants plan ahead with confidence.
👉 Try Verve AI Forecasting today and let AI handle your reorder points automatically.