The reorder level formula, with worked examples.
Simple formulas for reorder levels, safety stock and order quantities, with worked examples for a pharmacy and an agrovet.
By the poso team · Updated
Reorder level = average daily sales × lead time in days + safety stock. Safety stock is extra stock to cover busier days and late deliveries; a simple version is (maximum daily sales × maximum lead time) − (average daily sales × average lead time). When stock falls to the reorder level, order enough to bring it back up to a maximum level.
The terms
| Term | Meaning |
|---|---|
| Average daily sales | Units sold per day on average, over a recent period (for example the last 90 days). |
| Lead time | Days from placing an order to having the stock on the shelf. |
| Safety stock | Extra units held to cover sales spikes and late deliveries. |
| Reorder level (reorder point) | The stock level that triggers a new order. |
| Maximum level | The most stock you want to hold, to limit cash tied up and expiry risk. |
| Order quantity | Maximum level − current stock (rounded to the supplier's pack size). |
The formulas
Safety stock = (maximum daily sales × maximum lead time) − (average daily sales × average lead time)
Reorder level = (average daily sales × average lead time) + safety stock
Maximum level = reorder level + (average daily sales × days between orders)
Worked example: a pharmacy
A pharmacy sells paracetamol 500 mg in boxes of 100 tablets.
| Input | Value |
|---|---|
| Average daily sales | 6 boxes |
| Busiest day sales | 10 boxes |
| Average lead time | 2 days |
| Longest lead time | 4 days |
| Orders placed | Weekly (every 7 days) |
- Safety stock(10 × 4) − (6 × 2) = 40 − 12 = 28 boxes
- Reorder level(6 × 2) + 28 = 40 boxes
- Maximum level40 + (6 × 7) = 82 boxes
- Order quantityIf stock is 38 boxes when you check: 82 − 38 = 44 boxes, rounded to the supplier's carton size.
Worked example: an agrovet before planting
An agrovet sells a hybrid maize seed in 2 kg packets. Outside the season it sells 2 packets a day; in the four weeks before planting, 25 a day. The supplier takes 5 days, up to 10 in peak season.
| Off-season | Planting season | |
|---|---|---|
| Average daily sales | 2 | 25 |
| Maximum daily sales | 4 | 40 |
| Lead time (avg / max) | 5 / 7 days | 5 / 10 days |
| Safety stock | (4×7) − (2×5) = 18 | (40×10) − (25×5) = 275 |
| Reorder level | (2×5) + 18 = 28 | (25×5) + 275 = 400 |
The lesson: reorder levels must change with the season. Raise them a few weeks before demand rises and lower them as it falls, or you will run out at the peak and be stuck with seed afterwards. See seasonal stock planning.
Reorder levels and expiry
For products with short shelf lives, cap the maximum level so that the stock you hold will sell well before expiry: maximum level ≤ average daily sales × days of shelf life you can safely sell. Buying smaller quantities more often costs a little more in ordering effort but much less in expired stock.
A simpler rule if you have no data
- Start with reorder level = 2 weeks of typical sales, maximum = 4 weeks.
- Shorten for fast suppliers and short-dated products; lengthen for slow suppliers.
- Review after a month using real sales data from your system.
Turning it into automatic reorders
In poso, each product (per location) can have a minimum and maximum. When stock falls below the minimum, the product appears on the reorder list and poso drafts purchase orders grouped by supplier, with quantities that bring stock back to the maximum. See purchasing and reorder rules.
Reorder level questions
What is the reorder level formula?
Reorder level = average daily sales × lead time (days) + safety stock.
How do I calculate safety stock?
A common simple method: (maximum daily sales × maximum lead time) − (average daily sales × average lead time).
What is the difference between reorder level and reorder quantity?
The reorder level is when to order; the reorder quantity is how much. A common approach orders enough to reach a maximum level.
How often should I review reorder levels?
Quarterly, and before and after seasonal peaks, or whenever a supplier's lead time changes.
What is the reorder point in a pharmacy?
The stock level of a medicine at which a new order should be placed, calculated from average sales, supplier lead time and safety stock.
Last updated by the poso team.