How do I calculate a reorder point?

The standard reorder point formula is: (Average daily sales × Supplier lead time in days) + Safety stock. For example, if you sell 10 units per day and your supplier takes 14 days to deliver, the base reorder point is 10 × 14 = 140 units. If you also carry 30 units of safety stock, your reorder point is 170 units. When stock drops to 170, it is time to create a new purchase order.

What is the difference between a reorder point and a minimum stock level?

A minimum stock level (or minimum quantity) is the lowest amount of a product you want to hold at any time — essentially the safety stock floor. A reorder point is the trigger for placing a new order, which includes both the safety stock and the expected demand during the supplier's lead time. Your reorder point is always equal to or higher than your minimum stock level. When stock hits the reorder point, you order; when it hits the minimum, you should already have a purchase order on the way.

How often should I update my reorder points?

Reorder points should be reviewed whenever any of their inputs change significantly: (1) sales velocity changes — a product that previously sold 5 units per day and now sells 15 per day needs its reorder point tripled; (2) supplier lead times change — if a supplier's lead time increases from 10 to 20 days, the reorder point must approximately double; (3) safety stock changes — after a stockout event, safety stock should be increased, raising the reorder point accordingly. A practical schedule is to review all A-item reorder points monthly and B and C items quarterly.

Can Shopify automatically create purchase orders at the reorder point?

Shopify's native admin does not support automated reorder point monitoring or purchase order creation. A dedicated inventory management app like Supremo monitors each SKU's current stock against its calculated reorder point and alerts you when a reorder is due — or, depending on configuration, auto-creates a draft purchase order for you to review and approve.

How do I set different reorder points for different seasons?

Seasonal reorder point adjustment requires multiplying the standard reorder point by a seasonal index. If a product sells 3× its average rate in November, the November reorder point should be approximately 3× the off-season reorder point. Some inventory apps support seasonal reorder point profiles that automatically adjust thresholds by month. Without seasonal adjustment, merchants will consistently run out of stock at peak demand times because their reorder point was calculated from off-peak velocity.

What is the ABC method for prioritising reorder point accuracy?

ABC analysis classifies SKUs by revenue contribution: A items (top 10–20%, highest revenue) should have the most carefully calculated reorder points — per-SKU formulas based on exact sales velocity and lead time, reviewed monthly. B items use standard formula-based reorder points reviewed quarterly. C items can use simplified rules (e.g., order when stock drops to 2 weeks of average demand) without per-SKU calculation. This allocates analysis effort to where accuracy has the most financial impact.

What happens if I set my reorder point too low?

If the reorder point is set below the actual demand during supplier lead time, you will place a new order after you have already run out of stock — resulting in a stockout during the time between ordering and receiving. The consequences are lost sales on the days of the stockout, potential customer attrition, and possible emergency ordering costs. Setting the reorder point too low is the most common cause of preventable stockouts for merchants who have a reorder system but have not calibrated it correctly.

Complete Guide

Reorder Points for Shopify Inventory

Q: What is a reorder point?

A reorder point is the inventory level at which a new purchase order should be created for a product. When current stock falls to or below the reorder point, the merchant (or their inventory system) should initiate a replenishment order from the supplier. The reorder point is calculated to ensure that stock ordered at this level arrives before inventory runs out, accounting for the supplier's lead time and expected demand during that period.

How to calculate, set, and automate the reorder point for every SKU in your Shopify store — so you always order at the right time and never run out of stock.

What is a reorder point?

A reorder point is a stock level threshold. When current inventory falls to or below this level, it is time to place a new purchase order. The reorder point is calibrated so that new stock arrives from the supplier before the existing stock runs out — even if the supplier takes their full expected lead time.

Reorder points are SKU-level controls, not store-level. Every active product should have its own reorder point calculated from its own sales velocity and its own supplier's lead time. Using a blanket reorder point across all products — or not having one at all — is why most Shopify stockouts are preventable.

Triggers replenishment

When stock hits the reorder point, a purchase order is created. The order arrives before the safety stock is depleted, maintaining continuous availability.

Prevents stockouts

A correctly set reorder point means you never place an emergency order — you always order early enough that normal supplier lead time is sufficient.

Data-driven, not intuitive

Reorder points calculated from actual sales velocity and real supplier lead times outperform any heuristic — including 'order when it looks low' or 'reorder monthly.'

Per-SKU precision

A slow-moving product and a fast-moving product need fundamentally different reorder points, even if they come from the same supplier.

The reorder point formula

The reorder point has two components: the expected demand during supplier lead time, and the safety stock buffer for uncertainty. Together they determine the lowest stock level at which a purchase order must be created.

Reorder point formula

Reorder point = (Avg daily sales × Lead time in days) + Safety stock

Avg daily sales — average units sold per day over a meaningful lookback window (12–52 weeks). Exclude stockout periods from the calculation.

Lead time in days — calendar days from placing a purchase order to receiving goods at your warehouse. Use actual historical lead time, not the supplier's quoted estimate.

Safety stock — buffer for demand spikes and lead time variability. See the section below.

Example calculation

Product: Ceramic mug, 12 oz.

Average daily sales: 8 units/day

Supplier lead time: 14 days

Safety stock: 40 units (calculated below)

Reorder point = (8 × 14) + 40 = 152 units

When the ceramic mug stock reaches 152 units, create a new purchase order.

Safety stock as a buffer

Safety stock is the portion of the reorder point that protects against uncertainty. If demand were perfectly predictable and every supplier always delivered on time, safety stock would be zero. In reality, both demand and supply vary — and safety stock is the buffer that covers that variability.

Safety stock formula (practical)

Safety stock = (Max daily sales − Avg daily sales) × Max lead time

Using the example above: if maximum daily sales are 14 units and maximum lead time is 18 days, safety stock = (14 − 8) × 18 = 108 units.

Safety stock should not be a fixed company-wide number. Products with volatile demand need more safety stock. Products with highly reliable suppliers (consistent lead times, no delays) need less. Products with high stockout cost (best-sellers, high margin) should carry more safety stock than products where a temporary out-of-stock causes minimal harm.

Higher safety stock when

Demand is volatile; supplier lead time varies significantly; stockout cost is high (best-sellers, high-margin products); seasonal peaks are approaching.

Lower safety stock when

Demand is stable and predictable; supplier is consistently reliable; carrying cost is high (expensive, perishable, or space-constrained product); product is a slow C item.

Automating reorder point alerts

Manually checking every SKU's stock against its reorder point is not a scalable process. A merchant with 200 active SKUs checking daily would spend more time on reorder monitoring than on anything else. Automation solves this.

A dedicated inventory management app monitors each SKU's current stock continuously and compares it to the configured reorder point. When stock falls to or below the reorder point, the system either: sends an alert (email, in-app notification) prompting the merchant to create a purchase order, or automatically creates a draft purchase order for the merchant to review and approve.

Reorder automation setup checklist

Calculate reorder points for all A items first (highest revenue impact)
Assign each product to its primary supplier in the inventory app
Input calculated reorder points — or let the app calculate from sales velocity
Set alert preference (email, in-app, or auto-draft PO)
Test by manually reducing a test product below its reorder point
Review and refine reorder points monthly for A items, quarterly for B and C

Common reorder point mistakes

Using quoted lead times instead of actual

Suppliers quote their best-case lead time. Your reorder point should use your average actual lead time from historical POs, not the number your supplier rep mentioned. Actual lead times are almost always longer than quoted.

Not adjusting for seasons

A reorder point calculated from annual average sales will be too low going into peak season. Adjust reorder points before expected demand spikes — not after the first stockout signals the season has begun.

Including stockout periods in velocity calculation

If a product was out of stock for two weeks, those two weeks of zero sales will artificially lower your calculated average daily sales — and therefore your reorder point. Exclude stockout periods from velocity calculations.

Setting the same reorder point for all locations

Each location has its own sales velocity and its own restocking lead time. A warehouse reorder point should not be used for a retail store with different throughput and a shorter restocking window.

Never reviewing reorder points

A reorder point set 18 months ago reflects 18-month-old velocity data. As products grow or decline, reorder points become progressively less accurate. Unchecked reorder points lead to systematic over- or under-ordering.

Frequently asked questions

Automate reorder points for every SKU

Supremo calculates and monitors reorder points from your Shopify sales data — alerting you when it is time to order before stock runs out.