Supply Chain

Reorder Points

The reorder point converts forecasting and buffers into a standing trigger, with ordering removed from mood, and it's only ever as current as its inputs.

  • Beginner
  • 6 min total
  • 10 chapters

What decision this helps you make: Each SKU's trigger: velocity × lead time + buffer, fired on inventory position, plus the refresh cadence that keeps January's point from running August.

What this topic is

The reorder point is the assembled ordering system: a per-SKU inventory level (forecast velocity × lead time + safety stock) at which the next order fires. It is computed on inventory position, maintained as inputs drift, and separated from the how-much question.

Why it matters

Ordering by mood produces the category's classic deaths: the steady product that stocks out, the reorder placed at panic prices. The trigger system orders on schedule and frees attention for what it can't see: promotions, mechanisms, supply news.

Who should learn it

Anyone replenishing inventory. This is where the forecasting and buffer lessons become a working machine.

What you will understand

  • The formula: velocity × lead time + buffer, and what each input imports
  • Inventory position: on-hand + on-order − committed, or the trigger lies
  • When vs. how much: the point and the quantity are different decisions
  • Maintenance and automation: refreshed inputs, alerts with human review

Prerequisites

Common misconception

"I'll reorder when stock looks low." "Looks low" is a shelf glance that ignores the lead time (the six weeks of demand between ordering and receiving), the pipeline (the order already sailing), and the season (the peak the lead time is about to cross). The reorder point exists because the right moment to order is computable and almost never looks urgent: the shelf is still half full when a long-lead SKU's trigger correctly fires.