Reorder points: how to set them without getting it wrong
Published on · updated on
The reorder point (or alert threshold) is the quantity below which you need to order more. Simple on paper, but easy to get wrong in practice: set it too low and you discover the stockout too late; set it too high and you tie up cash and storage space for nothing.
The hidden cost of a bad threshold
A stockout doesn't just cost the lost sale: it often forces an urgent order, sometimes at a worse price or from a backup supplier. On the other hand, a threshold set too high freezes cash in products sitting on a shelf, with an added risk of expiry or obsolescence depending on the sector.
The right setting sits between the two: early enough to reorder calmly, late enough to avoid overstocking out of excessive caution.
What should actually go into the calculation
Three things really matter: the supplier's actual lead time (not the advertised one, the observed one), how fast the product actually moves (a fast-moving product deserves a more cautious threshold than a slow one), and a safety margin to absorb the unexpected: a delayed delivery, a demand spike.
The most common formula: reorder point = (average daily usage × lead time) + safety stock. A useful starting point, to be adjusted afterward with real experience of the product: never a value set once and left alone.
A reasonable threshold covers at least the consumption expected during the lead time, plus that safety margin. Below that, the risk of running out before the next order arrives increases noticeably.
A threshold is never set in stone
The threshold that made sense when a product launched won't necessarily still make sense six months later: a supplier change, seasonality, or shifting demand can make it obsolete. The habit worth building: review thresholds after any notable change, not only after a stockout has already happened.
Frequently asked questions
?Should every product have the same threshold?
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No. A fast-moving product with a slow supplier deserves a higher threshold than a slow-moving product with quick restocking.
?How does Fluxalyo actually use this threshold?
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Every product has its own alert threshold. As soon as stock drops below it, a notification goes out before the stockout, not after, enough time to reorder calmly.
See how to properly track a supplier order, from draft to receipt →