Reorder Point — Calculating the Order Trigger Correctly
The reorder point (order point) is the stock level at which a replenishment order is triggered automatically. It ensures enough goods are available during the replenishment lead time to meet demand — without tying up unnecessarily high stock. The reorder point is a core parameter of material planning.
The reorder-point formula
The reorder point is the expected consumption during the lead time plus a safety buffer:
Reorder point = (average daily consumption x lead time in days) + safety stock
Example: 50 units/day x 10 days lead time + 200 units safety stock = 700 units reorder point. When stock drops to 700, a reorder is placed.
Reorder point and safety stock
Both belong together but are not the same:
- Reorder point: the trigger for the order
- Safety stock: the buffer against demand spikes and late deliveries, already included in the reorder point
The longer and less reliable the lead time, the higher both values must be set.
Reorder point in the ERP
In the ERP, the reorder point is stored per item as a planning parameter. The consumption-based order-point method automatically creates a purchase proposal once available stock reaches the reorder point. Modern systems calculate the value dynamically from actual consumption history rather than static assumptions.
Related topics
Frequently Asked Questions
What is the reorder point?
The reorder point (order point) is the stock level at which a replenishment order is triggered automatically. It secures supply during the lead time without tying up unnecessarily high stock.
How do you calculate the reorder point?
Reorder point = (average daily consumption x lead time in days) + safety stock. Example: 50 units/day x 10 days + 200 units buffer = 700 units.
What is the difference between reorder point and safety stock?
The reorder point is the trigger for an order. The safety stock is the buffer against demand spikes and late deliveries — it is already part of the reorder point.
Is the reorder point monitored automatically in the ERP?
Yes. The reorder point is stored per item, and the system creates a purchase proposal automatically once available stock reaches it.
Should the reorder point be fixed or dynamic?
With stable consumption a fixed value suffices. With fluctuating demand, a dynamic calculation from current consumption history is more accurate and avoids both shortages and overstock.