Reorder Point
The inventory level at which a new order must be placed with the supplier. ROP = (Average Daily Sales × Lead Time) + Safety Stock. Prevents stockouts between orders.
In practice
Reorder point is inventory management's 'alarm.' When you hit the ROP, the order goes out automatically. The logic: ROP is calculated so inventory won't run out before the new stock arrives.
Common misconception
'ROP stays fixed forever.' ROP changes with seasonality (a dress shop → higher ROP before a holiday), supplier changes (new lead time), and growth (rising daily sales). Update ROP at least quarterly.
How to fix it
Hitting ROP too late (stockout before the shipment arrives)? (1) Check your lead-time calculation — is it accurate? Add a 20% buffer, (2) Check average daily sales — does it account for seasonality? (3) Set up ROP alerts in Shopify/your WMS — don't check manually.
Example
Supplement store: ROP 50 units, lead time 21 days, sales 4/day. ROP = 4×21 + safety = 84 + 30 = 114. Their ROP was off by 64 units — a stockout every month. Fixing the ROP led to zero stockouts the following quarter.
Priority
Calculate and update ROP quarterly for every Category A SKU. Set an alert in your WMS/Shopify when inventory hits the ROP. Automate the action: an email to the supplier with a ready-made PO.
Related terms
Keep learning. Metrics that touch the same area:
- Safety StockLogisticsExtra inventory held beyond what average demand requires — protects against demand fluctuations, lead-time delays, and forecasting errors. Safety Stock = Z × √Lead Time × Demand STD.
- Lead TimeOperationsThe time from ordering with a supplier to receiving inventory. Critical for calculating the reorder point.
- Demand ForecastingOperationsUsing historical data to predict sales volume. Enables ordering the right amount of inventory at the right time.
- StockoutOperationsA product unavailable for shipping. Immediate lost sales plus damaged trust.
- 3PL – Third Party LogisticsLogisticsAn external company for storage, picking, packing, and shipping. The store owner sends inventory to the 3PL, receives orders, and the 3PL handles fulfillment.
- Last Mile DeliveryLogisticsThe final leg of shipping — from the logistics center to the customer's door. 53% of shipping costs.
Jimmy tracks your Reorder Point, automatically
WhatsApp alerts when something important changes. No dashboards, no hassle.