Frequently Asked Questions
What is a reorder point?
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A reorder point (ROP) is the inventory level at which you should place a new purchase order. It ensures new stock arrives just before you run out, preventing stockouts while minimizing excess inventory. Setting the right ROP is critical for e-commerce businesses running on Shopify or WooCommerce.
How do you calculate reorder point?
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Reorder Point = (Average Daily Sales x Lead Time) + Safety Stock. For example, if you sell 20 units/day, have a 7-day lead time, and keep 50 units of safety stock: ROP = (20 x 7) + 50 = 190 units. When your stock hits 190, it's time to order.
What is safety stock and why is it needed?
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Safety stock is extra inventory kept as a buffer against unexpected demand spikes or supplier delays. Without safety stock, even small variations in sales or lead times can cause stockouts. The right amount depends on your demand variability, supplier reliability, and the cost of a stockout versus holding extra inventory.