How to set reorder points without overstocking
August 30, 2026 · 6 min read
Use demand, supplier lead time, and a practical safety buffer to decide when each item should be reordered.
A reorder point is the stock level that signals it is time to place another order. A useful starting formula is average demand during supplier lead time plus a safety-stock buffer.
Calculate demand using a period that reflects the way the item actually sells or gets consumed. Fast-moving products may need a weekly view, while seasonal or irregular items need comparisons with similar periods from earlier cycles.
Lead time should include more than the vendor estimate. Add the time required to approve an order, receive the shipment, inspect it, and make the stock available to the team.
Safety stock protects against ordinary variation, not every imaginable disruption. Increase the buffer for critical items or unreliable suppliers, and keep it lean for products that are inexpensive to replace quickly.
Review reorder points after demand shifts, supplier changes, or repeated stockouts. A threshold should be treated as an operating decision that improves over time, not a permanent setting.