Inventory Demand, Lead Time and Reorder Records

Separate the two purchasing questions

An order quantity asks how much to buy. A reorder point asks when to place the order. EOQ uses annual demand, cost per order and annual holding cost per unit. A reorder point usually joins average daily demand, replenishment lead time and safety stock. The formulas share a stock-planning context, but their inputs and outputs are different.

Build a daily demand record

Start with quantities sold or consumed in a defined window. Record returns and exceptional orders separately. If 900 units were used across 30 comparable operating days, average demand is 30 units per day. State whether weekends count; a calendar-day supplier lead time must not be combined silently with a working-day consumption measure.

Check the replenishment window

At 30 units per day and a ten-day lead time, demand during replenishment is 300 units. Adding 60 units of safety stock gives a 360-unit reorder point. The allowance here is an explicit planning amount. It is not a statistical service-level calculation, and an uncertain lead time may need a distribution rather than a single average.

Convert the estimate into an order

Compare the result with supplier pack sizes, minimum quantities, storage capacity and cash availability. If packs contain 24 units, record the rounding decision rather than changing the demand assumption. Keep the supplier quotation and last delivery history with the purchasing worksheet. Review demand and lead time independently when a stockout occurs.

Review record

Continue the decision

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