The reorder point is the stock level at which you place a new purchase or production order so replenishment arrives before you run out. It is set from two inputs: how long resupply takes (lead time) and how fast the item sells (demand rate). When on-hand inventory drops to this number, that is your signal to reorder.
How it works
The basic formula is:
Reorder point = (average daily demand x lead time in days) + safety stock
Say you sell 20 units a day and your supplier takes 10 days to deliver. Demand during lead time is 200 units. Add a safety stock buffer of 50 units to absorb spikes or supplier delays, and your reorder point is 250 units. When stock hits 250, you order.
Safety stock is the part most people underweight. Without it, any variation in demand or a late shipment leaves you out of stock before the new order lands.
Why it matters
A reorder point keeps you from stocking out on your fastest movers and from tying up cash in inventory you do not need yet. It turns replenishment into a rule instead of a guess, which matters more as SKU count grows.
Reorder points and B2B quoting
If you sell wholesale or made-to-order on Shopify, demand often arrives as quote requests before it becomes an order. Watching quote volume for a SKU gives you an earlier demand signal than waiting for confirmed sales, so you can adjust reorder points ahead of a large accepted quote draining stock. Quoting a lead time you cannot meet is a common way to lose a B2B deal, so tie your promised availability to real reorder logic. See the B2B quoting glossary for related terms.
Example
An item with 5 units per day demand, a 14-day lead time, and 20 units of safety stock has a reorder point of 90 units.