Reorder Point Formulas

The Reorder Point formula calculates the inventory level at which initiating a new order becomes necessary to replenish stock before depletion. These formulas are used by some OFC codes. For more detailed explanations for each OFC calculation, see the Order Formula Code Calculations topic.

Topics in this section are:

Reorder Point Formula #1

Sum of weekly sales (after effectual % is applied) for as many weeks as specified by the Lead Time + (safety stock % x the last 12 months sales) x increase sales factor.

If the reorder point is restricted to 12 months supply and the reorder point is less than the safety stock, use safety stock as reorder point.

If the increase/decrease sales factor is less than zero, set increase sales factor to zero.

Reorder Point Formula #2

Two months ago sales, last month's sales and this month's sales (use the month with the largest value) x (Lead Time / 4) + (Safety Stock % x the last 12 month's sales).

Retain existing reorder point, if calculated reorder point is less than existing reorder point.

Reorder Point Formula #3

Sum of months 1 through 12 sales (after effectual % is applied) x the Safety Stock % for the part (defaults to 10% if the safety stock = 0).

Note:  EOQ will not be greater than the sum of the next 12 months.

Reorder Point Formula M

Calculated using the week number and the Weighted Sales History for the month.

  • Lead Time = 4.5 weeks and it is week #1, the Reorder Point is calculated as:

    75% of this month last year (3 weeks) plus 25% of next month last year (1 week) plus 0.5*25% of next month last year (0.5 weeks) giving a total of 4.5 weeks sales history

  • Lead Time = 8.3 weeks and it is week #2 then the Reorder Point is calculated as:

    50% of this month last year (2 weeks) plus 100% of next month last year (4 weeks) plus 50% of 2 months from now last year (2 weeks) plus 0.3*25% of 2 months from now last year (0.3 weeks) giving a total of 8.3 weeks sales history.

Week # refers to the week of the month in which the stock order is being run - first week of month through fourth week of month. One month is assumed to equal 4 weeks: 

  • Week 1: 1st - 7th

  • Week 2: 8th - 15th

  • Week 3: 16th - 22nd

  • Week 4: 23rd - Last Day of the Month