Inventory Reorder Point (EOQ) Calculator

What does a typical Reorder Point & EOQ Calculator result look like?

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

• How do I calculate safety stock when demand is highly variable?

  Use a higher service level target (98 or 99 percent instead of 95 percent) or base your safety stock on maximum observed demand during lead time rather than statistical standard deviation. For lumpy or intermittent demand items (industrial spare parts, seasonal goods), consider a days-of-supply buffer instead of a statistical safety stock formula. Hold enough inventory to cover the longest realistic demand scenario during lead time, even if this exceeds the calculated statistical buffer.

• What reorder point should I use for items with long or unpredictable lead times?

  Increase safety stock proportionally to lead time uncertainty. If your supplier typically delivers in 10 days but occasionally takes 15, use 15 days as your lead time input or add extra safety stock to cover the 5-day variability. For overseas suppliers where lead times vary by 2 to 4 weeks due to shipping and customs delays, consider holding consignment inventory domestically or dual-sourcing from a local supplier for critical items to reduce effective lead time.

• Can I use the same reorder point for items sourced from multiple suppliers?

  No. Calculate separate reorder points for each supplier based on their specific lead time and reliability. If Supplier A delivers in 5 days with high consistency and Supplier B takes 10 days with frequent delays, your reorder point for B must be higher. For dual-sourced items where you split orders between suppliers, use the longer lead time for the reorder point calculation to ensure availability regardless of which supplier fulfills the next order.

• How often should I recalculate reorder points?

  Monthly recalculation works for most stable-demand items. Quarterly updates suffice for slow-moving products with predictable consumption. Recalculate immediately after major demand shifts, such as new product launches that cannibalize existing SKUs, promotional campaigns that spike sales, or loss of a major customer that drops baseline demand. Seasonal items require reorder point adjustments at each season transition to reflect the new demand pattern.

• What happens if my actual demand exceeds the reorder point assumption?

  You risk stockout before the replenishment order arrives. Monitor fill rates (the percentage of demand met from stock without backorder) to detect reorder point failures. If fill rates drop below your service level target, increase the reorder point by raising average daily usage estimates or adding more safety stock. Fill rate tracking reveals whether your reorder point assumptions match real-world conditions or require adjustment.

• Should I include pending orders when checking against the reorder point?

  Yes. Reorder point logic compares on-hand inventory plus open purchase orders (inventory position) to the reorder point. If you have 200 units on hand, a reorder point of 300, and 150 units on order, your inventory position is 350, which exceeds the reorder point, so no new order is triggered. Ignoring pending orders causes duplicate ordering and excess inventory buildup. Ensure your inventory system includes open PO quantities in reorder point comparisons.

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