The Standard Reorder Level Formula
Standard Reorder Level (ROL) Formula
Reorder Level = (Average Daily Consumption × Supplier Lead Time) + Safety Stock
Practical Factory Calculation Example:
- Average daily shop-floor consumption = 50 units per day.
- Supplier delivery lead time (including transit & inspection) = 6 days.
- Minimum safety buffer stock (to protect against supplier delays) = 100 units.
- Reorder Level = (50 × 6) + 100 = 300 + 100 = 400 units.
When physical store balance drops to 400 units, the system automatically alerts procurement to release a purchase order for the economic batch quantity.
Dynamic Factors in Setting Reliable Thresholds
Static reorder levels become dangerous when supplier lead times fluctuate or production volume spikes. Modern ERP systems continuously recalculate ROL by factoring in open purchase orders, seasonal demand spikes, and supplier reliability ratings.
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