Reorder Level Formula: From Beginner to Pro
Running out of stock can mean missed sales and unhappy customers. But carrying too much stock ties up cash in products that sit on shelves. The solution lies in knowing your reorder level — the minimum stock level that tells you when it’s time to order again.
In this guide, we’ll break down the reorder level formula, show you how to calculate it with examples, explain how it differs from reorder point, and share best practices for applying it in your e-commerce business.
What Is Reorder Level?
Reorder Level is the minimum stock quantity that triggers a new purchase order. When your inventory falls to this level, it’s time to restock to avoid stockouts.
It ensures continuity of supply by factoring in your maximum product usage and the longest possible supplier lead time.
Reorder Level vs. Reorder Point
Although often used interchangeably, they are not the same:
Reorder Level → Conservative calculation based on maximum usage and lead time.
Reorder Point → More balanced, based on average demand plus safety stock.
📌 See our guide on How to Calculate Reorder Point for a detailed breakdown.
The Reorder Level Formula
The formula is straightforward:
Reorder Level = Maximum Daily Usage × Maximum Lead Time
Where:
Maximum Daily Usage (MDU): the highest number of units sold or used in a single day.
Maximum Lead Time (MLT): the longest supplier delivery time, in days.
This ensures you have enough stock in worst-case scenarios (highest demand + longest wait).
Example: How to Calculate Reorder Level
Imagine you sell electronics on Shopify.
Maximum Daily Usage = 80 units
Maximum Lead Time = 10 days
Reorder Level = 80 × 10
Reorder Level = 800 units
✅ This means you should reorder when inventory drops to 800 units.
Another example:
Product SKU | Max Daily Usage | Max Lead Time (days) | Reorder Level |
|---|---|---|---|
T-Shirt A | 40 units | 14 | 560 units |
Hoodie B | 25 units | 20 | 500 units |
Cap C | 10 units | 30 | 300 units |
This table makes it easy to apply across multiple SKUs.
Reorder Level vs. Reorder Point
Both formulas are useful, but they serve different purposes.
Term | Formula | Use Case |
|---|---|---|
Reorder Level | Max Daily Usage × Max Lead Time | Conservative, worst-case stock planning |
Reorder Point | (Avg Daily Demand × Lead Time) + Safety Stock | Balanced planning with buffer |
Reorder Level is more conservative (higher threshold).
Reorder Point is more flexible, factoring in average demand and safety stock.
📌 Related reading:
When to Use the Reorder Level Formula
The reorder level formula works best when:
Demand is highly variable (uncertain sales patterns).
Supplier lead times are inconsistent.
You prefer a conservative approach to avoid stockouts.
You manage critical SKUs where running out would be very costly.
Limitations of Reorder Level Formula
While useful, the formula has drawbacks:
May lead to overstocking (because it assumes the maximum demand + maximum lead time every time).
Ignores promotions & seasonality (special campaigns may require adjustments).
Not dynamic — it won’t adapt as demand trends change.
This is why many businesses combine reorder level with demand forecasting and reorder point calculations.
📌 For a complete view, check our Inventory Forecasting and Planning guide.
Tools to Calculate & Monitor Reorder Levels
1. Excel / Google Sheets
Great for small stores starting out.
Easy to apply formula across SKUs.
Limitation: manual updates, prone to error.
2. ERP / Inventory Management Systems
Automate reorder level calculations.
Useful at scale, but can be expensive.
3. AI-Powered Tools (e.g., Verve AI)
Automatically calculates reorder levels and reorder points.
Adjusts for seasonality, promotions, and supplier variability.
Connects directly to Shopify for real-time SKU-level insights.
Best Practices for Reorder Levels
Update regularly: review maximum usage and lead time quarterly.
Segment SKUs: apply different reorder levels for fast vs. slow movers.
Combine with demand forecasting: use reorder levels as a baseline, but adjust with forecasting.
Automate alerts: integrate reorder levels with Shopify or inventory software to trigger orders automatically.
Don’t over-rely: balance reorder level with other formulas to avoid overstocking.
Conclusion
The reorder level formula is a simple but effective way to ensure you never run out of stock during peak demand or supply delays. By using:
Reorder Level = Maximum Daily Usage × Maximum Lead Time
… you can calculate a conservative threshold for reordering.
But while useful, it’s best paired with reorder points and demand forecasting for a complete inventory strategy.
👉 Try Verve AI Forecasting today and let AI automatically calculate reorder levels and reorder points for every SKU in your Shopify store.