OnSumo Tools

Inventory Reorder Point (EOQ) Calculator

This calculator finds the exact reorder point (ROP) and economic order quantity (EOQ) for any SKU. Enter your average daily demand, lead time, demand and lead time variability, service level target, and carrying costs to get safety stock, the stock level at which you should place a new order, and the optimal order size to minimize total annual inventory costs.

100% client-side. Inputs stay in your browser (ons-reorder-point-inputs).

Assumes steady demand and known lead times. Seasonal spikes or supplier delays may need manual buffer on top.

Reorder point

520 units

Safety stock

170 units

EOQ

675 units

Orders per year

27.0

Average inventory

508 units

Days of cover

10.2 days

Fixed order quantity vs EOQ

Order qtyAnnual orderingAnnual holdingTotal
50% of EOQ (338)$1,351$678$2,029
75% of EOQ (507)$901$847$1,748
EOQ (optimal) (675)$675$1,016$1,691
125% of EOQ (844)$540$1,185$1,725
150% of EOQ (1,013)$450$1,354$1,804

Total cost vs order quantity

EOQ at 675 units minimizes total annual cost ($1,691).

How this tool works

The reorder point is the inventory level at which a replenishment order must be placed to avoid stockout before the next delivery arrives. Formula: Reorder Point = (Average Daily Demand x Lead Time in Days) + Safety Stock. Safety stock absorbs demand and lead time variability: Safety Stock = Z x Standard Deviation of Daily Demand x sqrt(Lead Time), where Z is the service level Z-score (1.28 for 90%, 1.65 for 95%, 1.96 for 97.5%). When lead time itself varies, the fuller formula is: Safety Stock = Z x sqrt(Avg Lead Time x Demand Variance + Avg Demand^2 x Lead Time Variance). Economic Order Quantity (EOQ) is calculated alongside: EOQ = sqrt(2 x Annual Demand x Order Cost / Holding Cost per Unit per Year). Key assumption: the formulas assume demand follows a normal distribution. Heavily seasonal products or lumpy demand (a few large infrequent orders) require a different safety stock model -- set the demand standard deviation manually to reflect the true variability rather than relying on the tool's automatic calculation. Edge case: if a supplier delivers late by more than a day or two on a regular basis, using the average lead time will systematically underestimate the reorder point. Set lead time to the 95th-percentile delivery time for suppliers with unreliable shipping, not the average.

Worked example

Inputs: daily demand 50 units, lead time 7 days, demand std dev 10 units/day, lead time std dev 2 days, service level 95%, order cost $25, holding cost $2/unit/year. Safety stock: 1.645 times sqrt(7 times 100 plus 2500 times 4) = 170 units. ROP: (50 times 7) plus 170 = 520 units. EOQ: sqrt((2 times 18250 times 25) / 2) = 675 units. Total annual cost at EOQ: $1,691. When on-hand inventory reaches 520 units, place an order for 675 units.

Frequently asked questions

  • What is the reorder point?

    The inventory level at which you place a new order. It is calculated as the average demand expected during your supplier's lead time, plus a safety stock buffer to handle variability. Running below this level risks a stockout before the next order arrives.

  • Why is the EOQ curve U-shaped?

    Ordering more at once reduces the number of orders per year (lower total ordering cost) but increases average inventory on hand (higher holding cost). EOQ is the quantity at the bottom of the U-curve where the sum of ordering and holding costs is minimized.

  • What is safety stock and why do I need it?

    Safety stock is extra inventory held as a buffer against demand spikes and lead time variability. Without it, any month where demand runs higher than average or your supplier delivers late will cause a stockout. The formula accounts for both sources of variability using their standard deviations.

  • How do I find my demand standard deviation?

    Calculate your daily sales over the past 60-90 days and compute the standard deviation of those daily figures. In Excel or Google Sheets: =STDEV(daily_sales_range). Without historical data, a std dev of 20% of average daily demand is a reasonable starting point. Add a buffer of 10 to 15% above the calculated figure to account for measurement variation and material waste.

  • Does EOQ assume constant demand?

    Yes. The classical EOQ model assumes demand is steady and known. In practice, demand fluctuates, which is why safety stock is added separately. For seasonal products, run the EOQ calculation for your peak and off-peak periods separately.

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

    Reorder point is when to order. Minimum stock level (or safety stock) is the buffer you never want to go below. When on-hand inventory reaches the ROP, you still have safety stock units left to cover demand during the lead time.

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