Inventory planning is a balance. Order too late and you risk running out of stock. Order too early and cash sits in inventory for longer than necessary.
A simple reorder-point formula
A useful starting point is:
Reorder point = expected demand during lead time + safety stock.
If a product sells 10 units per day and the full replenishment lead time is 45 days, expected lead-time demand is 450 units. If you want another 14 days of safety stock, that is 140 units. The simplified reorder point would therefore be 590 units.
Use the full lead time
Do not count only factory production. Depending on the product, total lead time can include manufacturing, quality checks, freight, customs, delivery to the fulfilment network and receiving time before stock becomes sellable.
Sales velocity needs context
A short recent period can overstate or understate demand. Promotions, stockouts, seasonality and advertising changes can distort the average. Compare more than one time window when the product is volatile.
Safety stock is not arbitrary
Safety stock exists to absorb uncertainty. Products with stable demand and reliable replenishment may need less cover than products with unpredictable sales or long, variable supply chains.
Plan the cash as well as the units
A suggested reorder quantity is only half the decision. Multiply the proposed order quantity by landed unit cost to see the approximate purchase cash required. A reorder can be operationally correct and still create a cash-flow problem if too many SKUs need funding at once.
Watch days of cover
Days of stock cover gives an intuitive view of inventory pressure: current sellable stock divided by average daily sales. Compare that number with your full lead time plus safety-stock target.
Reorder planning works best as a repeatable process rather than a last-minute reaction when the dashboard turns red.
Browse our inventory and seller-planning tools for downloadable spreadsheets that automate these calculations.
Try it with your own stock: use the free Inventory Reorder Point Calculator. For repeat multi-SKU planning, use the Inventory & Reorder Planner.
Independent seller resource. Not affiliated with or endorsed by Amazon. Forecasts are estimates and should be reviewed against your own supply chain and demand data.