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Glossary

What Is Reorder Level? Meaning, Formula and a Worked Example

For store keepers, purchase heads and owners of trading and manufacturing businesses: know exactly when to buy each item, so you stop both stockouts and overbuying.

A store keeper looking at a nearly shelf in a hardware godown

What is reorder level? It is the stock figure that tells you it is time to buy again. Every item you keep has one, whether it is written down or held in a store keeper's head.

In many Indian SMEs the reorder decision is a feeling. The store keeper notices a thin rack, calls the owner, and the owner calls the supplier. By the time the goods arrive, a customer order has already been missed.

This page defines reorder level, shows the formula with a worked example, and explains how Apragya watches the figure for every item and godown.

Reorder level: the definition and the formula

Reorder level is the stock quantity at which you place the next purchase order for an item. When stock on hand falls to that figure, you buy, so that the new lot arrives before the shelf runs empty. It is also called the reorder point.

The common formula is: reorder level = average daily usage x lead time in days + safety stock. Lead time is the gap between raising the order and the goods being usable in your godown, including approval, transit and inspection.

Worked example: a fastener dealer sells 40 boxes of an M8 bolt a day on average. The supplier takes 8 days to deliver. Safety stock is 400 boxes. Reorder level = 40 x 8 + 400 = 720 boxes. When stock touches 720, the order goes out.

A simpler textbook version, used when usage swings a lot, is maximum daily usage x maximum lead time. With a worst case of 60 boxes a day and 12 days, that also gives 720. Either way, the figure is per item and per godown, and it needs review when demand or suppliers change.

  1. Find average daily usage over the last three to six months.
  2. Measure lead time from order to usable stock, not just transit.
  3. Decide safety stock for the risk you can accept.
  4. Multiply usage by lead time and add safety stock.
  5. Review the figure each quarter or when a supplier changes.

An example: a hardware distributor in Rajkot

Take an illustrative distributor stocking 1,800 items across two godowns. Reorder levels were set once, years ago, and fast movers kept running out while slow ones piled up.

From a falling stock figure to a draft order

  1. Stock falls

    M8 bolts drop to 700 boxes in the main godown.

  2. Level crossed

    The rule for that item and godown says 720.

  3. Daily scan

    The scan picks up every item below its level.

  4. Draft order

    One draft per preferred supplier and godown.

  5. Buyer approves

    Quantities checked, then sent to the supplier.

The daily scan replaces the morning walk around the racks.

The distributor recalculated levels for its top 200 items from six months of sales. Within a month the buyer was approving draft orders each morning instead of phoning around, and the bolts that used to run out every fortnight stayed on the shelf.

A shelf of bolt boxes filled back to a painted green line beside a new carton
With orders drafted at the reorder level, the fast-moving bolts stayed above the line.

How Apragya uses the reorder point in inventory

Step 1 of 5

Rules per item and godown

Each reorder rule holds the reorder level and the quantity to order.

  1. Rules per item and godown: Each reorder rule holds the reorder level and the quantity to order.
  2. Live stock figures: Receipts, sales and transfers update stock the moment they are posted.
  3. Scheduled scan: A daily scan finds every item at or below its level.
  4. Draft purchase orders: Drafts are grouped by preferred supplier and godown, without duplicates.
  5. AI suggestions: A stock optimiser agent can suggest reorder points and safety stock from history.

What a missing reorder level costs

Lost orders

Customers buy elsewhere when the item is out of stock for a week.

Rush freight

Emergency buying means premium rates and express transport.

Dead stock

Guesswork in the other direction ties cash up in slow items.

Daily firefighting

Someone has to walk the racks every morning to decide what to buy.

Reorder level formula in a sheet, against Apragya

A spreadsheet can hold the formula, but it cannot see stock move. Someone still has to paste the day's figures in and remember to look. The value of a reorder level is in being checked every day, for every item, without effort.

Reorder tracking, two ways

FeatureSpreadsheetApragya inventory
Stock figurePasted in from the booksUpdated on every posting
Per godownUsually one figure per itemA rule per item and godown
CheckingWhen someone remembersA daily scan
Next stepPhone call to the supplierDraft order for approval
ReviewRarelyAI suggestions from history

Checked against public information on 16 September 2026.

How to calculate reorder level for your items

  1. Export six months of sales and consumption by item.
  2. Note each supplier's real lead time.
  3. Set safety stock for your fast movers first.
  4. Enter a reorder rule per item and godown.
  5. Approve the first week of draft orders carefully.

Start with the 20 percent of items that make most of your sales; the rest can follow.

What else helps you buy on time

One product record

Purchase, sales and stock read the same item master.

Batches and expiry

Stock can be tracked by batch, with expiry dates where needed.

Barcode scanning

Receipts and picks are scanned, so the stock figure stays honest.

Approvals by role

Draft orders go to buyers with the right permission.

Stock reports

Stock levels, movements and ageing in one place.

Several companies

Each company keeps its own godowns and levels.

Read about safety stock, stock levels and purchase orders in Apragya.

What it costs to start

INR 3,999
Starter, a month
Up to 10 users, CRM and HR plus Inventory and Warehousing
2,000
AI Credits a month
Included on Starter
Free
Up to 3 users
CRM, HR and Vendor Onboarding

Reorder level, answered

Is reorder level the same as reorder quantity?
No. Reorder level says when to buy; reorder quantity says how much. Apragya holds both on the reorder rule.
Can one item have different levels in different godowns?
Yes. Rules are set per item and godown, because usage differs by location.
Does Apragya send orders to suppliers on its own?
No. The scan creates draft purchase orders, and a buyer reviews and sends them.
How often should reorder levels change?
Review them quarterly, and whenever demand, a supplier or lead time changes.
What does it cost to start?
Inventory and Warehousing is available from the Starter plan, INR 3,999 a month for up to 10 users, which includes CRM and HR plus a choice of enterprise apps and 2,000 AI Credits a month. Pro, at INR 7,999 a month, covers 25 users and every enterprise app.

Let the stock figure tell you when to buy

Set reorder rules for your fast movers and approve tomorrow's draft orders.