How to Calculate a Reorder Point for Shopify Inventory

A reorder point is the stock level at which you place the next purchase order. The formula is lead time demand plus safety stock: the units you expect to sell while the new stock is on its way, plus a buffer for the days when sales run high or the delivery runs late. This guide shows how to measure each input from your own Shopify data, works through an example, and covers the things the formula leaves out: seasonality, supplier minimums and the fact that every input is an estimate.

What is the reorder point formula?

Reorder point = (average daily unit sales × lead time in days) + safety stock.

The first part is lead time demand. If you order when stock falls to exactly that level, and everything goes as usual, the delivery arrives as the last unit sells. The second part, safety stock, exists because things do not always go as usual.

Calculate it for each variant, not each product.

How do you measure daily sales and lead time?

From your own history, and with a little care about what you count.

Average daily sales is units sold over a period divided by the number of days in it. Two cautions:

• Leave out days when the item was out of stock. A day with nothing to sell records zero, and including it understates real demand. Divide by the days the variant was available.
• Choose a period that resembles the one ahead. The last 30 days work for a steady seller. For anything seasonal, they describe the season that is ending, not the one in which the new stock will sell.

Lead time runs from the day you place the order to the day the stock can be sold, not the day it ships. It includes the supplier's production or picking time, transit, any customs clearance, and the time your own team or warehouse needs to receive and shelve it. Take it from your past purchase orders, not from the supplier's quoted figure.

How much safety stock do you need?

Enough to cover a bad combination of high sales and a slow delivery, without tying up cash in stock that only sits. There are two simple ways to set it.

• Days of cover. Hold a fixed number of days of average sales as a buffer.
• Maximum less average. Take your highest daily sales multiplied by your longest lead time, and subtract average daily sales multiplied by average lead time.

Whichever you use, safety stock is a business choice more than a calculation. A larger buffer means fewer stockouts and more money on the shelf.

What does a worked example look like?

Here is an example with made-up round figures.

Say a variant sells 8 units a day on average, and deliveries take 15 days from order to shelf.

• Lead time demand: 8 × 15 = 120 units.

Now the buffer, using the maximum-less-average method. Say the busiest days reach 12 units, and the slowest delivery took 20 days.

• Worst case: 12 × 20 = 240 units.
• Safety stock: 240 − 120 = 120 units.
• Reorder point: 120 + 120 = 240 units.

So when stock of that variant falls to 240, you order. If sales and delivery are average, the new stock arrives with about 120 units still on hand. If both go badly at once, it arrives just as you run out.

How does seasonality change the reorder point?

It means the reorder point is not one number for the year. Lead time demand should use the daily sales you expect during the delivery window ahead, and in a seasonal business that is not the same as the recent average.

Continue the example. If the same variant normally doubles to 16 units a day in the weeks before a holiday, lead time demand for an order placed going into that period is 16 × 15 = 240 units before any buffer. A reorder point of 240, set on quiet-season figures, would leave no buffer at all.

So recalculate reorder points ahead of each season using last year's sales for the same weeks, adjusted for how the business has grown; our guide to forecasting sales for a small Shopify store covers that adjustment. Review lead times at the same time, since suppliers and carriers can be slower just when your sales are faster. On the way out of a season, lower the reorder point just as deliberately.

What about supplier minimums and order quantities?

The reorder point tells you when to order. It does not tell you how much. Quantity is set by other things: the supplier's minimum order, case and pallet sizes, price breaks, and how much cash you want in stock.

• If the minimum is large, work out how many weeks of sales it represents. If that is many months, it is a cash decision more than an inventory one.
• If several variants come from one supplier, the order is usually triggered by whichever reaches its reorder point first. Top up the others in the same order instead of waiting for each to hit its own line.

Returns count too. Units that come back in saleable condition add to stock, so a product with a high return rate needs a lower reorder point than its sales alone suggest; see our guide to tracking refund and return rates.

Why is the result only an estimate?

Because every input is. Average sales assume the future resembles the past, lead time assumes the supplier behaves as before, and safety stock assumes the worst case you have seen is the worst that can happen.

Treat the reorder point as a prompt to look, not an instruction to buy. Marka Metrics offers inventory forecasting and reorder suggestions on its paid plans, and labels its forecasts as estimates. The judgement about a new product, a planned promotion or a supplier you no longer trust stays with you.

A short checklist

1. Calculate average daily unit sales per variant, excluding out-of-stock days.
2. Measure lead time from order to shelf, using past deliveries.
3. Set safety stock by days of cover or by maximum less average.
4. Add lead time demand and safety stock to get the reorder point.
5. Recalculate before and after each season.
6. Decide order quantity separately, around supplier minimums and cash.

Our guide to Shopify analytics beyond the built-in reports covers the other gaps that planning runs into. For inventory forecasts and reorder suggestions next to your sales reports, see Marka Metrics.