Reorder Level Formula for Shops and Wholesalers

Your reorder level is the stock quantity at which you should place a fresh order, so that new goods arrive just before the shelf goes empty. The formula is: reorder level = (average daily sale x lead time in days) + safety stock. If you sell 6 packets a day, the supplier takes 2 days, and you want 6 packets as a cushion, your reorder level is 18 packets.

That one line prevents two common problems. Order too late and you run out; order too early and you carry stock that ties up cash. Below you will find each part of the formula, worked examples for a kirana and a wholesaler, and a simple way to apply it with a notebook.

The three parts of the reorder level formula

1. Average daily sale

How many units do you sell on an ordinary day? Take the last two to four weeks of sales, add them up and divide by the number of days. Use a longer period for slow items so one unusual day does not mislead you.

Be careful to count in the same unit you order in. If you sell loose packets but order by the box, convert first.

2. Lead time

Lead time is the gap between placing the order and having the goods ready to sell. It includes the supplier's packing, transport and your own unloading. Note the real number, not the promised one. If "next day delivery" often becomes two days, plan for two.

3. Safety stock

Sales and deliveries are never perfectly steady. A wedding in the neighbourhood, a rainy day, a delayed truck: safety stock is the cushion for these surprises. A simple way to set it is to keep a few extra days of average sale for fast items. The more unpredictable the item or the supplier, the bigger the cushion.

Worked example: a kirana buying tea

• Average daily sale: 5 packets of 250 g tea
• Lead time: 1 day (the wholesaler delivers next morning)
• Safety stock: 5 packets (about one day)

Reorder level = (5 x 1) + 5 = 10 packets. When the shelf and godown together show 10 packets, order. By the time the delivery comes you will still have about 5 packets left.

Worked example: a wholesaler buying a biscuit carton

• Average daily sale: 4 cartons
• Lead time: 3 days (the company supplies twice a week)
• Safety stock: 6 cartons

Reorder level = (4 x 3) + 6 = 18 cartons. If the stock in hand is 18, place the order.

Note the lead time is longer, so the level is much higher. That is why distributors need a good stock system more than a small shop does.

How much to order: the other half

The reorder level tells you when. How much to order depends on:

• How many days of sale you want to cover until the next order
• Pack size or minimum order quantity of the supplier
• Shelf life of the item (do not over-order short-expiry goods)
• Available cash and storage space
• Any scheme, but only if you can sell the extra quantity in time

A simple rule: order enough to reach your target stock level, for example a few days above the reorder level, then round to a full box or carton.

Count what is really available

Use available stock, not just what is on the shelf. Include:

• Plus goods already ordered and on the way
• Minus stock promised to open orders (important for wholesalers)
• Minus damaged or expired goods that cannot be sold

If you forget goods on the way, you will place a second order too early.

Make it work in a small shop

You do not need a spreadsheet. A card or a page for each fast item is enough:

Item	Daily sale	Lead time	Safety stock	Reorder level
Tea 250 g	5	1 day	5	10
Atta 5 kg	3	1 day	3	6
Biscuit carton	4	3 days	6	18

Put the number where you can see it. When you take a count and an item has reached its level, circle it. Place the order on your next ordering day. Review the numbers every month or two, since sales change with season and festivals (see festive season stock planning).

When the formula needs adjusting

• Seasonal items. Cold drinks, ghee in winter, or sweets near festivals sell differently by week. Use recent weeks, not the whole year.
• Slow items. If you sell one packet in a week, a formula is overkill. Keep one or two and reorder when you sell one.
• Short-expiry goods. Keep the level low and order more often. Read about expiry management.
• Items you want to phase out. Set the level to zero and let them run down.

Reorder level and your general stock health

The reorder level connects to other measures. Items that keep hitting zero before the level suggest your daily sale is higher than you think or your lead time has grown. Items that never come near the level may be on the way to becoming dead stock. A look at both lists each month shows where your money is working and where it is waiting.

How MaalMitra helps

MaalMitra does not make you do the maths each day. It helps the people on both sides of the order:

• For wholesalers: stock moves with every order, cancellation and short delivery, items go out of stock and back automatically, and low-stock alerts tell you when to reorder. A movement log shows where quantity went, which helps you tune your numbers. Excel or CSV import saves typing your opening stock.
• For retailers: smart reorder suggestions show the pattern, such as "usually every N days, last ordered M days ago", so you see what is due. Repeat order lets you review a previous basket before placing it. Nothing is ordered automatically.
• Analytics with product demand help you see which items sell faster and need a higher level.

Want to go deeper on stock basics? Read our guide to kirana inventory management.

Quick recap

1. Find your average daily sale.
2. Note your real lead time.
3. Add a safety cushion.
4. Reorder when available stock touches the level.
5. Review the numbers every month.

If you run a wholesale business, try MaalMitra and let low-stock alerts do the watching. Retailers use it free.