Inventory Reorder Point Calculator User Guide
This tool is designed to help you calculate the reorder point for products in your inventory.
After inputting your sales and inventory data it will tell you how much stock to reorder and when you should place the order by.
Step 1: Adding inventory info
Start by adding information about the inventory you want to calculate a reorder point for.
Calculate the reorder point one product at a time to ensure the data is accurate.
1. Unit Cost
Enter the price you pay to have one unit of the product manufactured. Don’t include shipping costs or taxes.
2. 30 Day Sales
Enter the total number of units you have sold of this product in the last 30 days across all channels.
To find this on Shopify, go to Analytics and sort by the last 30 days.
To find this on Amazon, go to Reports > Business Reports > Detail page sales and traffic by child item.
This helps calculate your 30-day velocity and therefore the size of order you should place to meet customer demand and avoid stocking out.
3. Lead Time
Finally, add your lead time in days.
This should be the total time expected between placing an order with your supplier and having the stock available to sell.
This is vital for forecasting your optimal reorder point.
Step 2: Adding current inventory levels
Next, it’s time to add information about the stock you’re currently holding.
The optimal reorder point formula we use takes into account the stock level you are carrying in order to provide the most accurate forecast possible.
Add the number of units you currently have:
- At Amazon: Stock that is being stored at an Amazon fulfillment center.
- At Your 3PL(s): Stock that is being stored at a 3PL warehouse or your own warehouse.
- En Route: Stock that is either in production or on its way to you already.
Step 3: Determining inventory coverage
The third and final section in the reorder point calculator asks for your desired inventory coverage.
This is the number of days worth of inventory you’d like to order.
Some businesses prefer to order several months’ worth of inventory at a time to maximize the economies of scale, whereas others prefer to order smaller quantities on a regular schedule to keep inventory trickling in at a good pace.
Use the slider to select the best fit for your business, and the calculator will then be able to advise on the best order quantity for you.
Step 4: Understanding your results
Once you’ve entered all the required data you’ll be presented with a range of results:
- 30-Day Velocity: The average number of units this product has sold each day over the last 30-day period.
- Lead Time Demand: How many units you sell during the time it takes to get new stock. For example, if it takes 50 days for new stock to arrive after you place an order and you sell 10 units each day, your lead time demand is 500 units (because 50 days x 10 units/day = 500 units).
- Inventory Runway: How many days’ worth of inventory you have remaining at current sales volumes. This does not include safety stock, so if you are factoring safety stock in then this would add an extra buffer beyond this figure.
- Suggested Order Quantity: The size of order the tool recommends you place based on the data you have entered.
- Suggested Order Timeframe: A recommendation on when you should place your order based on current stock levels, sales volumes, and lead time.
- Cost Of Order: The total cost of the suggested order quantity based on your unit cost and broken down by a relatively standard payment term of 30% deposit (pre-production) and a 70% balance once production is completed.
This tool is designed to give estimates to help with planning and is not a financial modeling tool. Sales volume and lead time can fluctuate based on a number of factors so it is always best to err on the side of caution.
Frequently Asked Questions
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