What if demand is seasonal?

Then an annual average is the wrong input, and the point has to be recomputed per season. The failure is asymmetric: a reorder point set on the yearly average is too low going into the peak — exactly when running out costs the most — and too high afterwards, leaving capital stranded in stock nobody wants until next year. Recompute at each turn of the season rather than once a year.

Should stock already on order count towards the point?

Yes, and forgetting it is the fastest way to double-order. What the reorder point should be compared against is the inventory position — what is on the shelf plus what is on order minus what is already promised to customers — not the physical count. A business that compares against the shelf alone reorders again every time it looks low, and discovers the mistake when two deliveries arrive in the same week.

The Reorder Point Is a Quantity That Answers a Question About Time

Published 9/22/2026 · 3 min read · Business tools

Camille Laurent — Finance writer at OneKitly

Tax · Personal finance

Checked against 2 sources

View profile →

In short

The reorder point is demand during the lead time plus safety stock, and each half answers a different question. A hundred units a day for a ten-day lead is 1,000 — that is simply what will be sold while the replenishment is in transit, and it has nothing to do with how much you would like to hold. Add 300 units of safety stock and you reorder at 1,300. Change the lead time and the point moves without a single unit of demand changing: cut delivery to five days and the same business reorders at 800. That is the practical value of computing it rather than guessing a level — the number tracks the supplier, and a supplier who quietly slips from ten days to fourteen turns a well-run reorder point into a stockout without anything visible changing on the shelf.

Selling 100 a day with a ten-day lead time and 300 units of safety stock, you reorder at 1,300 — not because 1,300 is a comfortable level, but because that is what ten days of selling costs.

It says when to order, not how much

The reorder point is a trigger and nothing else. How much to buy when it fires is a separate calculation, driven by the cost of placing an order against the cost of holding what it brings. Confusing the two produces the classic pattern of ordering the same quantity every time the shelf looks low — which is a reorder point with no order quantity behind it, and it either floods the warehouse or has you ordering every week.

Everything must be in the same time unit

Daily demand with a lead time in weeks is the most common way to get this wrong, and it fails silently — the answer is a plausible-looking number seven times too small. Decide on one unit before entering anything, and prefer the one your sales data already uses. If demand is recorded per working day, the lead time has to be in working days too: ten calendar days across two weekends is six selling days, and the difference is four hundred units on the figures above.

100 a day, 300 units of safety stock
Lead time	Demand during lead time	Reorder point
5 days	500	800
10 days	1,000	1,300
14 days	1,400	1,700

Worked with our own calculator

Reorder point calculator

Given

Average daily demand (units): 100
Lead time (days): 14
Safety stock (units): 200

Result

Reorder point (units): 1,600

These figures are produced by the calculator below, not typed in by hand — they are recomputed whenever the tool changes.

Run it on your own figures →

Frequently asked questions

What if demand is seasonal?: Then an annual average is the wrong input, and the point has to be recomputed per season. The failure is asymmetric: a reorder point set on the yearly average is too low going into the peak — exactly when running out costs the most — and too high afterwards, leaving capital stranded in stock nobody wants until next year. Recompute at each turn of the season rather than once a year.
Should stock already on order count towards the point?: Yes, and forgetting it is the fastest way to double-order. What the reorder point should be compared against is the inventory position — what is on the shelf plus what is on order minus what is already promised to customers — not the physical count. A business that compares against the shelf alone reorders again every time it looks low, and discovers the mistake when two deliveries arrive in the same week.

Articles you may find interesting

All guides →

ExplainerA 30 % Sell-Through Is Excellent or Alarming, and the Missing Word Is "When"120 units sold out of 400 received is 30 %. Whether that is a success depends entirely on how long it took, and the rate on its own does not carry the answer.ExplainerFour Points of Service Level Cost 41 % More StockGoing from a 95 % service level to 99 % raises the z-score from 1.645 to 2.326 and the safety stock from 346 units to 488. The last few points of availability are the expensive ones.ExplainerGMROI: the Inventory Number That Outranks MarginGross margin return on inventory investment divides gross margin by the cash tied up in stock. It exists because margin alone ranks products wrongly: a 60% margin turning twice a year loses to a 25% margin turning twelve times.ExplainerThe EOQ Square-Root Formula, and Where It Stops Being TrueEOQ = √(2DS/H) balances ordering cost against holding cost. Its most useful property is how flat the cost curve is around the optimum — and its four failure modes are quantity discounts, lumpy demand, a finite replenishment rate, and the two inputs nobody can measure.ExplainerThe Count Says 48,200 and the Books Say 50,000A gap of 1,800 is a shrinkage rate of 3.6 %. The percentage is the number that travels; the absolute figure is the one that pays for the fix.ExplainerCost of Goods Sold Is What Left the Shelf, Not What You BoughtOpening stock 40,000, purchases 120,000, closing stock 35,000 — the cost of goods sold is 125,000, and it is larger than the purchases because the shelf gave up 5,000 of what was already there.

Sources

Spotted a mistake in this article?