Running out of a best seller costs you twice: the sale you lose today, and the customer who decides to shop somewhere else next time. A reorder point is the stock level that tells you "order now", calculated so new stock arrives before the shelf is empty.
The simple formula
Reorder point = (average daily sales × supplier lead time in days) + safety stock
- Average daily sales: take the last 4 weeks of POS data and divide by the number of days you were open.
- Lead time: days between placing an order and having it on the shelf, including delivery days and the time to receive and shelve it.
- Safety stock: a buffer for busy days and late deliveries.
- Average sales: 24 cartons a day
- Supplier lead time: 2 days
- Busiest day recently: 36 cartons, so the extra demand is about 12 per day
- Safety stock: 12 × 2 days = 24 cartons
- Reorder point: (24 × 2) + 24 = 72 cartons
When stock falls to 72, place the order. Check shelf life too: if milk keeps for 9 days, don't order more than you can sell in about a week.
How much to order
A practical order quantity covers sales until your next scheduled delivery, plus safety stock, minus what you already have. For perishables, cap it by shelf life. For dry goods, consider supplier minimums and price breaks, but don't let a bulk discount tie up cash in stock you'll sell in three months.
Review reorder points regularly
Reorder points aren't set-and-forget. Recalculate them:
- Monthly for your top 20 items
- Before paydays, holidays and school breaks, when demand changes. 15th and 30th paydays often bring busier weekends in the Philippines.
- Whenever a supplier changes their delivery schedule
Let the POS raise the flag
Set each product's low-stock threshold in your POS to its reorder point. The dashboard then shows what needs ordering every morning, so nobody has to walk the aisles with a clipboard. Combine this with FEFO so you're reordering based on stock that's actually sellable, not stock that's about to expire.
Key takeaway: base reorder points on real daily sales and real lead times, add a buffer, and review them before busy periods.
This article is general information for business owners in the Philippines, not legal, tax or financial advice. Rules and rates change, so confirm the details that apply to your business with the relevant agency or a qualified professional. Figures in worked examples are illustrative. Last reviewed October 2026.
