87 Comments
Khadar on March 30, 2017 at 4:22 am
Thank you
It was helpful articleReply
Eshetu Tadesse on June 14, 2017 at 5:22 am
Article Feedback*thanks alot
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Amalina on July 3, 2017 at 10:20 pm
What is safety stock?
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Thomas Wong on July 5, 2017 at 11:14 am
Good question, Amalina. We’ll be writing a more specific article on safety stock in the future, but the quick answer is: it’s the amount of extra stock that you keep on hand to ensure that your business is unaffected by shortages in supply (for example, if your purchase order is delayed by two weeks). It’s like a rainy day fund, but for inventory.
[Update: our safety stock article is now published at https://www.inflowinventory.com/blog/how-to-calculate-your-safety-stock/ ]
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Michael on July 23, 2017 at 11:58 am
Hi, please can you tell the difference between minimum stock level and the safety inventory? If there is and difference whats the essence of knowing the minimum level then? Thank you
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Thomas Wong on November 15, 2017 at 10:21 am
Hi Michael, the reorder point basically becomes your minimum stock level, because you’ll want to reorder once you fall *below* the reorder point. So if you had a reorder point of 20 and you reached 18 or 19 pcs on hand, you’d want to reorder. You’d be below your minimum stock level.
Safety stock is calculated as part of that reorder point, the more safety stock you decide on, the higher your reorder point will be.
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Mohamed on August 6, 2017 at 3:29 am
Many Thanks
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Tom on September 7, 2017 at 3:37 am
Hey man,
You could only have 29.54 stock left if someone ordered .46, not .54 as you wrote in the article!
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Thomas Wong on October 31, 2017 at 1:08 pm
Hi Tom, thanks for pointing this out! Sorry about that — we’ve made the correction in the post.
– ThomasReply
Boniface Kinyua on November 11, 2017 at 8:27 am
Question.
The following is the consumption of rice in certain hotel.
maximum consumption=6000kg per week.
minimum consumption=4000kg per week.
Reoder period 4-6 weeks
Reorder quantity 30,000kg
Calculate
i)Re-order period.
ii) Minimum stock level.
iii)Maximum stock level
iv)Average stock level
How can i calculate this?Reply
Thomas Wong on November 14, 2017 at 6:08 pm
Hi Boniface! Sorry, this post doesn’t deal with max stock levels, but rather the minimum threshold before you *should* reorder.
If you’re looking for a min/max approach, you might need a different article for this question (I did a quick search, and this one may help: https://www.lokad.com/min-max-inventory-planning-definition).Reply
Zia Ullah on November 11, 2017 at 1:47 pm
Its too good and very easy to understand thank u very much for this good efforts dear.
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Chuck Meathrell on December 27, 2017 at 2:35 pm
Under my area working for a state agency in South Carolina, I have a main warehouse and four smaller sub-warehouses. The smaller warehouses serve specific facilities for the agency and order FROM the main warehouse.
Can your system operate reorder points for all of the five warehouses?Thanks
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Thomas Wong on January 15, 2018 at 4:47 pm
Hi Chuck,
Sorry for the late reply on this! At present, inFlow’s reordering is company-wide. You can set reorder points for specific products, but reordering would only trigger when you drop below a company-wide stock level of X (not per location).
If I understand you correctly, you’d find it more useful if these sub-warehouses could have their own reorder points. This is something we’re taking into consideration for future updates to inFlow, so I’ve added your vote to the list! If this changes, we’ll make sure to get in touch with you via email to let you know!
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Chris on January 17, 2018 at 12:36 pm
Hey Thomas, very nice article. Please ping me back I would like to discuss more about this.
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ramon p. bongat on January 25, 2018 at 6:53 pm
Many thanks..my query is..
where or how was 14 arrived at in determining the safety stock?
Thanks!
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Thomas Wong on January 30, 2018 at 10:42 am
Hi Ramon, the 14 days was a simplified estimate based on having two weeks of stock, which is what we’ve seen from other small businesses. However, another way to estimate safety stock is to think of it as a percentage of your lead-time demand. We go into a bit more detail about that in this article: https://www.inflowinventory.com/blog/safety-stock-calculation/
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Taha Tanveer on February 2, 2018 at 2:02 pm
Dear,
first of all I am really thankfull to you for this detail information.butt my question is that how can we decided to purchase or manufacture quantity for stock(like minimum or maximum level)Reply
marudhupandi on March 13, 2018 at 9:25 pm
The article was extremely good.it was very useful to me….
Regarding safety stock,I have a small doubt ..why could we take up 14 days stock as safety stock,?Reply
TALENT CHUNGA on March 15, 2018 at 9:44 am
EXPLAIN THE ROLES OF JIT AND TQM AND SUPPORTIVE SUPPLIERS RELATIONS PLAY IN MORDEN MANUFACTURING
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Thomas Wong on March 15, 2018 at 1:56 pm
Hi Talent, thanks for reading! We’ll take those under consideration for future topics on the blog!
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thembinkosi pasipamire on March 22, 2018 at 4:58 am
educative
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- See AlsoThe Reorder Point Formula: All You Need to Know [+ Video]The 6 Main classifications of inventorySafety Stock Formula: how to calculate and useComputing Percentiles
Charantej Reddy Goli on April 20, 2018 at 4:11 pm
Hi Thomas, I would like to set up par levels for a restaurant where the deliveries are made to the restaurant on a daily basis and I do have the historical usage of product for every day of the week. The goal is to have enough product at the store to meet the demand but at the same time not have too much product sitting at the store how do I achieve this?
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Thomas Wong on April 25, 2018 at 11:50 am
Hi Charantej, good question!
For reordering, it’s really a balancing act. Since you have the historical usage data already, you can calculate an average daily unit sale and then factor in your lead times — basically following the formula in the article at that point.
One point I didn’t touch on in the article was the safety stock for items with a short shelf life, like food.
Depending on the time of ingredient, it might only last a few days, so you might have to think about a safety stock levels in terms of days (instead of ~ two weeks like the article suggested).After that it’s really just about watching the low points in your inventory at the end of each day. If you’re constantly running too low on an item by the end of the day, you can increase its safety stock levels.
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BIGDADDY on June 6, 2018 at 3:06 pm
WHAT IS THE FORMULA FOR EOQ
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Thomas Wong on June 12, 2018 at 10:24 am
Hi there! Sorry, we don’t have an article on EOQ at the moment, but I’ll definitely consider it for the future on our blog!
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Wisdom Kwesi on June 14, 2018 at 6:13 am
How to determine minimum reorder level for sand.
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Thomas Wong on June 18, 2018 at 11:25 am
Hi Wisdom,
We don’t have any on-hand experience with reordering sand, but I’d imagine it would be done by volume or by weight, and you can set up units of measure within inFlow: https://www.inflowinventory.com/support/cloud/what-if-i-sell-my-items-in-a-different-unit-than-i-purchase/Once you’ve set those up, you can set up a reorder point that uses the unit of measure you specify: https://www.inflowinventory.com/support/cloud/is-there-a-way-to-reorder-items-that-are-low-in-stock/
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Salim Habib on August 10, 2018 at 1:11 pm
Hi Thomas Wong,
Helpful article. Please describe with example for setting up automatic reminders for reorder points by Excel.
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Vijay on August 13, 2018 at 1:06 am
This is new formula. Can be applied this formula for arrivals of tourists?
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Thomas Wong on August 14, 2018 at 10:58 am
Hi Vijay, this formula is meant to help you reorder stock of physical goods before you completely run out, it isn’t necessarily meant to be applied to how many tourists might be visiting a place. I think you might have to google for another kind of formula for that, sorry!
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Sanila on September 14, 2018 at 2:05 am
There is also a term Goods In Transit(GIT) which is subtracted from this ROL formula but its not here.how can we calculate GIT??
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Thomas Wong on September 18, 2018 at 12:16 pm
Hi Sanila, sorry about that, this post doesn’t include GIT as part of this formula.
But our software, inFlow Cloud, does track the status of products on order: these are products that have been ordered from a vendor but haven’t been received yet. And once you set your reorder point, inFlow will also take the goods in transit into account when suggesting what to reorder.Reply
Bella on September 30, 2018 at 8:53 am
it was helpful
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Mahesh Padhiyar on October 1, 2018 at 5:31 am
We have consumption data and lead time for the product. Now we want to calculate minimum inventory level, Maximum inventory level, and Reorder level.
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Thomas Wong on October 1, 2018 at 12:26 pm
Hi Mahesh, sorry, this article covers the reorder point (level) specifically. But thank you for the feedback, we’ll consider those other two topics (min/max inventory) for other articles!
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Mustafa Ali on October 26, 2018 at 9:52 am
Hi. Very Nice Article and very Helpfull (my english not great)
I AM EMPLOYEE IN A COMPANY. THAT HAVE 1000 OF ITEMS
TODAY BOSS QUESTION ME HOW TO A CHECK ON REORDER LEVEL in software that we use. Software have report (Stock Less then reorder level).
But Boss need that how can we check items that come near to reorder level means item reorder level is 500 and he says that when item quantity is near to 600 then u report me about this. how can i do this.
thanks alot
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Thomas Wong on October 26, 2018 at 5:05 pm
Hi Mustafa, thanks for the feedback!
As for the question: you could set up a spreadsheet cell with conditional formatting that could turn a certain color as you get close to the reorder point, but I’m not aware of any software that does this (including inFlow).
Rather it sounds like your boss might want a reorder point closer to 600 rather than 500, if that’s really the level that he’s worried about. Or the other thing you could tweak is how much you reorder at a time (the reorder quantity). If you keep hitting your reorder point quickly, then maybe the business could try reordering *more* product at a time.Sorry I couldn’t be more definitive with the response, but I hope that helps!
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Subhankar Karmakar on January 17, 2019 at 12:09 am
What is reorder point formula if lead time is more than cycle time?
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Christy on January 22, 2019 at 9:35 pm
Hi, great formula.. its helpful
May i know how if I have 3000 different items? is there another way to count the reorder point?Reply
Thomas Wong on January 30, 2019 at 11:35 am
Hi Christy, good question!
We actually have a new report in our software, inFlow Cloud, that helps with this. It can take your sales numbers into account, as well as the lead time, and can suggest reorder points for your products. We’ve got more information on the feature here: https://www.inflowinventory.com/support/cloud/can-inflow-recommend-a-reorder-point-for-my-products/And if you’d like to try inFlow out for yourself, you can do so for free from here: https://www.inflowinventory.com/signup
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ahesanali on January 26, 2019 at 5:46 am
Nice article sir.
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William Afloe on March 2, 2019 at 12:04 am
Wow, that was a great piece of article out there for a grab. I’m glad to have read this. Thanks for the thorough explanation.
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Gabriel on March 27, 2019 at 10:56 am
Good article but the report used is not available on the desktop version, unless there is an update I am missing.
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Thomas on April 9, 2019 at 4:50 pm
Hi Gabriel, sorry we missed this one. The Recommended Reorder Point report is a new feature we’ve added to inFlow Cloud for Windows in the past few months. I’m afraid that feature is not present in inFlow On-Premise, but the Reorder Stock window that we mention is available in both versions of our software.
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Erico Masongsong on May 5, 2019 at 8:18 pm
Good Morning,
Dear Sir Thomas, This is Eric from Philippines.
1st of all this tool is very helpful for us, but I would like to ask question, How to calculate the quantity to be ordered after reaching the Ordering point?
Hoping for your reply
Best Regards
EricReply
Thomas on May 8, 2019 at 1:42 pm
Hi Erico, the reorder quantity can often be dictated by which vendor you’re buying from. Many vendors can have a minimum order quantity (MOQ), and our software, inFlow Cloud, has a spot specifically so that you can input the reorder quantities.
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Antonio Marcos F Souza on June 19, 2019 at 3:41 am
Very nice explanation. Thank you Thomas.
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Dharmendra Patel on June 21, 2019 at 9:34 pm
What type of materials to be considered in min max category.
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Shashank- Nepal on July 30, 2019 at 10:41 pm
Hi Thomas. Very nice article. But can you tell me how much should we order for the next batch when we hit the reorder point, as i get confused with other articles in the internet. So after i get to the reorder point how much shall i order?
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Thomas on August 6, 2019 at 12:22 pm
Hi Shashank,
Our software, inFlow Cloud, can help with how much you should reorder based on your sales and inventory levels.
But if you aren’t using our software yet, a good starting point would probably be to think about reordering to cover X number of days/weeks.
So when you hit your reorder point, you could examine the average daily sales of that product.
Then, as an example, you could use that average and multiply it by 5 to cover another week’s worth of stock, or 10 to cover two weeks of stock.
You’ll need to tweak that number to suit your business, but having a high enough reorder point should keep you from running completely out of stock while you wait for new orders to come in.Reply
Holly Carlin on August 2, 2019 at 11:39 am
Seams that the system uses the Vendor for lead times and not the item being ordered itself?
If I order the same item from 2 different vendors then how does that work?
If I order for different locations how does that work?Reply
Thomas on August 6, 2019 at 12:59 pm
Hi Holly,
That’s a good question and thank you for taking the time to share your thoughts.
You’re correct that our implementation of lead time is at the vendor level and not at the item level, so we cannot currently account for multiple receiving locations or different lead times per item.
We’d like to improve reordering within inFlow in the future, but I’m afraid I don’t have a timeline to share just yet.I have submitted your feedback to our team along with your email address, so someone from inFlow will get in touch if we have improvements to share down the line.
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Thanigaivel Junior Engineer on August 22, 2019 at 10:35 pm
Thank u
Got idea about re orderReply
Stephen on October 14, 2019 at 3:10 pm
Hi. What if there’s a factory production minimum? How do we factor that in? Thanks!
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lesego on October 24, 2019 at 7:28 am
minimum level is 60
re order level is 100,do i need to place an order?Reply
Thomas on October 24, 2019 at 6:16 pm
Hi Lesego, the way we’ve defined the reorder point here is to basically treat it like a minimum level. So once you dip below the reorder point (in your case 100), then that is when you should order more stock.
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Anne on January 7, 2020 at 12:03 am
WHAT IF THE SAFETY STOCK IS IN DAYS LIKE KEEP A 2 DAYS SAFETY STOCK?
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RK on April 19, 2020 at 10:48 pm
Fabulous job
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Charlie on September 29, 2020 at 1:13 pm
Hi Thomas.
I’m a mfgr who used a premier Re-order Point manufacturing software system for many years – MAPICS/IBM – great stuff, can’t say enough about it.
Looking for another system today, but looks like the whole world (mistakenly) has a knee-jerk reaction and blurts out MRP at the drop of a hat. I don’t want an MRP system. OP works just fine. Are you able to recommend any notable such systems on today’s market.
This is also to address the full needs of a small mfg company. Thanks! (good article)Reply
Thomas on October 1, 2020 at 4:09 pm
Hi Charlie, I would recommend inFlow Cloud if you do manufacturing and you need to keep an eye on stock levels and reorder points. Our software offers reorder points on a per-location basis, so if you have multiple offices or manufacturing sites, each of them can track stock separately (while still being able to transfer stock to each other). You can see our manufacturing features here:
https://www.inflowinventory.com/features/manufacturing
But if you want an overview of other manufacturing software, Capterra is a good place to start: https://www.capterra.com/
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Yin Yin on October 28, 2020 at 10:39 pm
May I know can we use this reorder formula for ordering items for multiples shop from production for donut business.
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Thomas on October 29, 2020 at 10:49 am
Hi Yin Yin, yes you could. I’d just recommend using the formula on a per-location basis. Don’t just use it once across all locations.
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sin on December 16, 2020 at 8:21 am
how do we get the average daily unit sales?
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Babar Masood Channa on March 14, 2021 at 9:33 am
Hi Thomas,
I hope you are doing well. I read your article “Reorder Point Formula and Safety Stock” which was very informative.
I have a few questions related to re-order point but I have not been able to find a good answer to it. Could you please explain what are the different variables that can affect the reorder point or level from within the organization? Or what are the factors that may hamper the warehouse or distribution center from placing a reorder or effect it in any way.
I would appreciate if you can provide me any lead on my question.
Regards,
Babar MasoodReply
Obasanjo Haukena on March 18, 2021 at 5:39 am
Which formula of Re-order point to be used if an organisation has a policy to keep safety inventory?
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Richie on March 1, 2022 at 6:05 pm
Hi,
Does order frequency need to be taken into account when looking safety stock settings within the re-order point formula.
Example below:
Sales:
– Jan 120
– Feb 80
– Mar 60
– Apr 97
– May 118
– June 28Therefore:
– Average 84 units per Month
– Max 120 units per Month
– Lead time 14 days
– Order frequency 7 daysReorder point = Avg daily sales * lead time) + SS
Reorder point = (2.8*14) + (14*2)
Reorder point = 67.2Do I need to add any additional safety stock based on whether my order frequency was 1 week or 4 weeks?
Thanks,
Richie
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Jared Plumb on March 1, 2022 at 7:46 pm
Hi Richie,
Frequency doesn’t need to be taken into consideration when dealing with any of these calculations. Figuring out your reorder point is all about not having to order on a regular basis but instead ordering only when you need product. That way you’re never sitting on excess inventory which can come with added costs. When implemented correctly using reorder points will ensure you’ll always stay at the perfect level of stock without ever dealing with stock outs. Your safety stock will be there just in case you experience any unforeseen shipping delays.
Hope this helps,
JaredReply
Mary Etter on March 28, 2022 at 3:02 am
Very impressive, thanks a lot for sharing a helpful post with us.
Reply
Jared Plumb on March 28, 2022 at 9:29 am
Hey Mary,
Thanks for reading, we’re glad you liked it! We love helping people out in anyway we can around here 😉
All the best,
JaredReply
Tony on September 23, 2022 at 8:03 am
Hi Tom,
How can I account for demand in relatively set multiples? In Maintenance many items are often used in multiples but, given the formula’s basis on average daily usage a Safety Stock value may result in an insufficient quantity.
Example 1: (2) units of an item are used per year and only ‘demanded’ once per year, the average daily value and resulting Safety Stock will be significantly less than (1) and the minimum stock will be set to (1). While the demand frequency is 1/yr, the quantity per demand is actually (2). Can that be baked into the Safety Stock and ROP?
Can I account for minimum projected demand? If item X has not been ‘requested’ in the past 365 days, but when demanded it is know that at least Y quantity will be demanded, 200 for example?
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Jared Plumb on September 26, 2022 at 11:06 am
Hi Tony,
If you’re using multiple items in your workflow and they are required they should be factored into your formula. In the example you gave if 2 units are used per year then your demand per year should also be 2. Your minimum stock should be set to a number that will allow you to still operate. If you need 2 units to do maintenance then your minimum stock should be at least 2 units.
Hope this helps,
JaredReply
michael on October 25, 2022 at 2:31 pm
Great by all means and a very informative blog. I’ve learned something new today, keep sharing worthy info like this!
Reply
Jared Plumb on October 26, 2022 at 1:00 pm
Hey michael,
Thanks for reading! Be sure to subscribe to our content newsletter to get updates whenever we post new content.
Cheers,
JaredReply
Asif Roman on December 28, 2022 at 10:13 am
Find the reorder point of a product if average weekly demand is 50 units, with lead time of 2 weeks, and standard deviation of demand during lead time is 10 units. Take z= 2:33 (99% service level), [ROP=x+25’d; x=dLT sd sdx Sq Rt (LT)]
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matt on March 28, 2023 at 11:05 pm
thank you for the author .. 🙂 .. Very impressive, and thanks a lot for sharing ideas regarding this articles.
Reply
Jared Plumb on March 29, 2023 at 12:27 pm
Hey matt,
Thanks so much for reading, and a double thank you for the kind words! We love helping people out whenever we can. If you want to keep up to date with all our new content you can subscribe to our newsletter at the bottom of the page.
Cheers,
JaredReply
Yesnospin on June 8, 2023 at 12:04 pm
I found this blog post to be very helpful. Thank you for writing it!
Reply
Jared Plumb on June 8, 2023 at 1:31 pm
Hey Yesnospin,
We’re glad we could help! Please consider subscribing to our newsletter at the bottom of this page to stay up to date with all our new releases.
All the best,
JaredReply
Syllable Counter on June 8, 2023 at 12:06 pm
I found this blog post to be very helpful. Thank you for writing it!
Reply
Jared Plumb on June 8, 2023 at 1:29 pm
Hey Syllable,
Thanks for stopping by and taking the time to read our blog! We’re super glad we could help.
All the best,
JaredReply
PRAKASH on August 12, 2023 at 7:18 am
Consider an economic order quantity case where annual demand D=1000 units, economic order quantity Q= 200
units , the desired probability of not stocking out P=0.95 , the standard deviation of demand during lead time 6L
=25units and lead time = L=15 days. Determine the reorder point. Assume the demand is over a 250 week day year.
Solution:
d = D/no. week days = 1000/250 = 4
Re-order level(R) = dL + z L = 4×15 + 1.64 × 25 = 101Reply
Aldous on October 23, 2023 at 11:46 pm
12months sales history – 36 units
12 months sales forecast – 40 units
average sales for 12 months – 3 units
average sales for 6 months – 3.8 units
lead time – 120 days
safety stock – 60 days
replenishment cycle – 120 days
Qty on hand – 22 units
Qty on order – 0 unit
MOQ – 1What quantity is the recommended order? Thank you.
Need reply by 1pm, Thanks in advance, God bless!Reply
Jared Plumb on October 24, 2023 at 2:13 pm
Hey Aldous,
Thanks for reading. Based on the numbers you gave, if you want to have safety stock for 60 days you would need 7.6 units (3.8 units/month x 2 months). If you’re ordering 3 times per year and need to account for safety stock then every 120 days you should order 21 units. This would give you 63 total units over the course of 12 months (40 to account for your forecasted and 21 for safety stock). Hope this helps.
Cheers,
JaredReply
