What is a reorder point?
A reorder point is the on-hand quantity at which you place a new order so stock lasts until the delivery arrives. It equals average daily demand multiplied by supplier lead time, plus a safety buffer.
Example
A café sells 12 bags of beans a day. The roaster delivers in 5 days. A buffer of 20 bags covers a slow delivery.
Reorder point = 12 x 5 + 20 = 80 bags.
When stock drops to 80, the café orders. By the time the order lands in 5 days it has used 60, leaving the 20-bag buffer. If it ordered at 60 instead, a one-day delay means running out.
In Atta
Each item can carry a reorder point. A sweep checks stock and, when an item is at or below it, opens a restock request. It never places an order itself. A person approves the request like any other purchase, through the approval rules.
On hand is the sum of the stock ledger, and the stock outlook shows days of cover from the measured rate and quoted lead times, in a straight line, with a count shown as unknown until a figure exists. The reorder point tool on this site applies the formula above.
Check the inputs
The formula is only as good as the demand figure. Averaging over a week hides the weekend spike. For the café, if Saturday sells 30 bags, a reorder point built on the 12-a-day average will miss it. Use the busiest ordinary week, not the average.
Questions
Does the reorder point change over time?
Yes. When demand or lead time moves, recalculate it.
Related
- What is safety stock?Safety stock is the extra inventory held to cover demand spikes or late deliveries. Definition, a simple formula and a worked example.
- What is lead time?Lead time is the wait between placing an order and receiving it. Definition, how it feeds reorder points, and a worked example with figures.
- AI inventory management that ends in a purchase requestAtta keeps stock as a ledger, forecasts when each item runs out from measured usage and quoted lead times, and opens a restock request instead of ordering.