Reorder Points & Safety Stock

Decide when to reorder and how much buffer to hold so you never run dry or overspend.

4 lessons 35 min 5-question assessment 75% to pass

What you’ll learn

Calculate a reorder point from demand and lead time

Size safety stock to absorb demand and supply variability

Set reorder points per branch and SKU

Review and tune the numbers as demand changes

Lesson 1 of 4 Reading 8 min

What a reorder point is

A reorder point is the stock level at which you place a new order. Hit it, and you reorder; sit above it, and you wait. The basic formula is average daily demand multiplied by lead time in days, plus a safety buffer.

Without a reorder point you are guessing — ordering too late means empty shelves, ordering too early ties up cash. A clear trigger turns reordering from a gut feeling into a rule any cashier or branch manager can follow.

Say your Westlands branch sells 20 units of a SKU a day and your supplier takes 5 days to deliver. You will burn 20 × 5 = 100 units while waiting. Set the reorder point at 100 (plus buffer) and AWRA flags the SKU the moment on-hand drops to that line — so you order while you still have a working week of stock.

Key takeaways

Reorder point = average daily demand × lead time + safety stock.
It is a trigger level, not a quantity to order.
A clear trigger replaces guesswork any staff member can follow.
Example: 20/day × 5-day lead time = reorder at 100 units plus buffer.

Lesson 2 of 4 Reading 9 min

Why safety stock matters

Safety stock is the extra buffer you hold to cover the days when demand spikes or the supplier runs late. It is the cushion between your average plan and the real, bumpy world.

Demand is never perfectly steady and suppliers are never perfectly on time. Safety stock is what stops one busy weekend or one delayed truck from emptying your shelves and sending customers to a competitor.

If your branch normally sells 20 units a day but a promotion pushes it to 35, and the supplier slips from 5 days to 7, you would need 35 × 7 = 245 units against a plan of 100 — a 145-unit gap. A safety stock of, say, 150 units (a few extra days at peak) absorbs that shock instead of you losing two days of sales.

Key takeaways

Safety stock buffers demand spikes and late deliveries.
Average plans break when reality is bumpy.
It prevents one busy weekend or late truck from causing a stockout.
Example: a 145-unit demand/lead-time gap is absorbed by a 150-unit buffer.

Lesson 3 of 4 Practice 9 min

Setting points per branch and SKU

Reorder points are not one-size-fits-all. A fast-moving SKU at a busy branch needs a higher point than the same item at a quiet outlet. You set the number per item, per location.

Setting them at the right level means each branch reorders for its own demand, not the company average — so a slow branch is not drowning in stock while a busy one runs dry.

Your CBD branch sells a SKU at 50/day and your Nakuru branch at 8/day, both with a 4-day lead time. CBD’s reorder point lands near 200 + buffer, Nakuru’s near 32 + buffer. Setting them per branch in AWRA means each location triggers its own purchase order at the right moment instead of sharing one wrong number.

Key takeaways

Reorder points are set per SKU and per branch.
Fast branches need higher points than quiet ones.
Per-location points stop both overstock and stockouts.
Example: CBD reorders near 200, Nakuru near 32, for the same SKU.

Lesson 4 of 4 Reading 9 min

Reviewing and tuning

Reorder points are not set once and forgotten. Demand drifts with seasons, promotions, and new competitors, so the numbers need a periodic review to stay honest.

A point set last year against last year’s sales will either stock you out (if demand grew) or bloat your shelves (if it fell). A quarterly review keeps the trigger matched to what you actually sell.

If a SKU that sold 20/day now sells 30/day but its reorder point is still 100, you are reordering a third too late and stocking out before each delivery. Re-checking the last 90 days of sales each quarter and nudging the point to 150 closes that gap before it costs you sales.

Key takeaways

Demand drifts, so reorder points need periodic review.
A stale point causes stockouts or overstock.
A quarterly review keeps the trigger matched to real sales.
Example: a SKU growing 20→30/day needs its point raised 100→150.

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Reorder Points & Safety Stock

What you’ll learn

Course content

What a reorder point is

Why safety stock matters

Setting points per branch and SKU

Reviewing and tuning

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