Why one number fails
A reorder point is the stock level at which you place the next order. The basic formula is:
Reorder point = average daily demand x lead time in days + safety stock
The formula works. The problem is feeding it company averages. Your main warehouse might sit 2 days from the supplier and sell 40 units a day. A branch in another state might wait 9 days and sell 12. Averaging them gives a number that is too low for the branch and too high for the main site.
Inventory tools are starting to reflect this. Stockful's October 2026 update lets each location carry its own lead time, and Intuit's Fall 2026 Enterprise Suite release brings multi-location stock and transfers online. Those are vendor announcements, but they show where the market is heading: planning by location instead of by company.
How to set reorder points per warehouse
1. Measure demand at each location
Pull 8 to 12 weeks of dispatches per item per warehouse. Use what left the building, not what was ordered, and remove one-off bulk orders that will not repeat. For seasonal items, use the same period last year as well.
2. Measure the lead time each site really waits
Lead time is the gap between raising the purchase order and the stock being usable on the shelf. Count supplier processing, transport and your own receiving time. Take it from your last few purchase orders, not from the supplier's quote. If a branch is restocked by transfer from the main warehouse, its lead time is the transfer time, and the main warehouse needs to carry that branch's demand in its own number.
3. Size safety stock to the variation
Safety stock covers the days when demand jumps or a delivery is late. A simple starting point many teams use:
Safety stock = (maximum daily demand x maximum lead time) minus (average daily demand x average lead time)
It is easy to explain and easy to check. If you have reliable data and many items, a statistical method based on standard deviation and a target service level is more precise. Start simple, then refine for your fast movers.
4. Put it together
Here is a worked example with illustrative numbers for one item:
| Main warehouse | Branch warehouse | |
|---|---|---|
| Average daily demand | 40 units | 12 units |
| Average lead time | 2 days | 9 days |
| Maximum daily demand | 55 units | 18 units |
| Maximum lead time | 3 days | 12 days |
| Safety stock | 85 units | 108 units |
| Reorder point | 165 units | 216 units |
The branch sells less than a third as much, yet needs a higher reorder point because it waits longer and its deliveries vary more. A single shared number would have missed that.
5. Review on a schedule
Recalculate monthly for fast movers and quarterly for the rest. Recalculate straight away when you change a supplier, a transport route or a warehouse's role.
Common mistakes
- Using the supplier's quoted lead time instead of the time you actually wait.
- Ignoring receiving time. Stock sitting unchecked at the dock is not available.
- Setting the same safety stock for every item. Slow, cheap items rarely need the buffer that fast, critical items do.
- Treating stock transfers as free and instant. They take days, and they cost money.
- Running the numbers on inaccurate stock counts. If system stock and shelf stock disagree, fix inventory accuracy first.
When software helps, and when it does not
A spreadsheet can handle a few dozen items across two sites. Beyond that, keeping demand, lead times and reorder points current by hand gets slow and error prone. Software that tracks stock per warehouse, records purchase and transfer dates, and flags items below their reorder point saves that effort.
Software will not fix bad inputs, though. If purchase orders are not closed when goods arrive, or transfers are not recorded, the system will calculate confidently from wrong data.
If you sell through several channels as well, see how connecting online and in-store stock fits with this.
Ascent24's BestERP brings inventory, procurement and multi-warehouse management into one system for growing businesses. If you would like help setting this up for your own warehouses, email info@ascent24.io or send us your details.
FAQs
What is a reorder point?
It is the stock level that tells you to place the next order, so new stock arrives before you run out. It equals average daily demand multiplied by lead time, plus safety stock.
Should every warehouse have its own reorder point?
Yes, for any item stocked in more than one place. Demand and lead time usually differ by location, so a shared number leaves some sites short and others overstocked.
How often should reorder points be updated?
Monthly for fast-moving items and quarterly for the rest, plus whenever a supplier, route or warehouse role changes.
What if a branch is supplied from our own main warehouse?
Use the transfer time as the branch's lead time, and include the branch's expected demand in the main warehouse's reorder point.
Sources
- Stockful changelog, "A lead time for each location", October 2026: https://docs.stockful.app/changelog
- Intuit, "What's new in Intuit Enterprise Suite: Fall 2026 release": https://erp.intuit.com/blog/product-update/fall-2026-intuit-enterprise-suite-release-notes/
