A stockout is a sale you were ready to make and could not. A reorder point is the simplest tool for preventing it: the on-hand level at which you should place a purchase order so new stock arrives before you run out. The math is not the hard part. Trusting the numbers you put into it is.
The formula
A basic reorder point is two pieces plus a cushion:
- Demand during lead time — how many units you sell, on average, over the time it takes a reorder to arrive (average daily sales × lead-time days).
- Safety stock — a buffer for the weeks demand runs hot or the supplier runs late.
- Reorder point = demand during lead time + safety stock. When on-hand crosses it, you order.
For an item selling 5 units a day with a 10-day lead time and a 20-unit safety buffer, the reorder point is (5 × 10) + 20 = 70. Hit 70 on hand, cut the PO.
Why most reorder points are wrong
The formula fails when its inputs are guesses. If sales data lives in one system, purchase-order lead times in another, and multi-location stock in a third, then "average daily sales" and "current on-hand" are stitched together by hand — and a reorder point built on stitched-together numbers is stale the day you set it. This is the quiet reason so many businesses still find out they are out of a bestseller from an angry customer.
The reorder-point math is trivial. Trustworthy demand and on-hand numbers are the whole game.
Where unified data changes the answer
When sales, inventory, and purchasing share one source of truth, the inputs stop being guesses. Actual demand — across every location — is already there; lead times come from your real receiving history; on-hand is the same count the register and the storefront use. Omni adds demand forecasting and ABC analysis on top, so you can focus safety stock on the items that actually matter, and purchasing turns the signal into POs without re-keying. The point of the backbone is not to replace the arithmetic — it is to make the numbers feeding it real.
Start simple, then tune
You do not need a forecasting model on day one. Set basic reorder points on your top-selling and longest-lead-time items first, watch them for a few cycles, and tighten the safety stock as you learn each item's real variability. The goal is boring: new stock lands a little before the shelf empties, every time.