InventoryOct 23, 2025
Shopify Reorder Formula: Reduce Stockouts by up to 94%
When a store runs out of stock, every minute counts. Poorly managed inventory costs thousands in lost sales, frustrated customers, and expensive rush orders. According to our data, Shopify brands that apply the reorder formula with automated alerts reduce stockouts by up to 94% and save more than $18,000 per month during demand spikes.
This guide explains how to calculate your reorder point, define safety stock, and set up proactive alerts so you never run out of inventory again.
Table of Contents
Key Concepts
Before using the formula, it’s essential to understand three basic concepts for any inventory or operations manager:
Lead time: the number of days your supplier takes to deliver an order once it’s placed. Example: if your supplier takes 10 days on average, that’s your lead time.
Average daily demand: the average number of units sold per day. Example: if you sell 300 units per month, your daily demand is 10 units.
Safety stock: the extra inventory that protects you from unexpected events like demand spikes or supplier delays. Recommended formula: Standard deviation of demand × square root of lead time.
Once you know these, you can calculate the exact point where you should reorder before running out of stock.
Practical Reorder Point Formula
The reorder point tells you the exact inventory level where you should place a new order.
Formula:
Reorder Point = (Daily Demand × Lead Time) + Safety Stock
Example
Let’s say your average daily sales are 12 units, your supplier takes 10 days to deliver, and your safety stock is 30 units:
(12 × 10) + 30 = 150 units
That means when your stock drops to 150 units, you should reorder. Waiting longer increases the risk of a stockout before the replenishment arrives.
In Shopify, you can automatically calculate and track this for each product so your AI Inventory Assistant notifies you before you hit the threshold.
How to Calculate the Optimal Reorder Quantity
Knowing when to reorder is important, but knowing how much to reorder is just as crucial. The EOQ (Economic Order Quantity) model minimizes both ordering and holding costs.
Formula:
EOQ = √((2 × Annual Demand × Order Cost) / Holding Cost)
Example
Annual demand: 3,600 units
Order cost: $40
Annual holding cost per unit: $2
EOQ = √((2 × 3,600 × 40) / 2) = √(144,000 / 2) = √72,000 = 268 units
So, the optimal reorder quantity is approximately 268 units per batch.
If you prefer a simpler rule of thumb: order between 1 and 1.5× your lead time demand to maintain a stable flow without overstocking.
Proactive Alerts 14–30 Days in Advance
The secret to avoiding stockouts isn’t just math — it’s anticipation. Set up alerts that trigger 14–30 days before you hit your reorder point, giving you time to act before stock runs out.
In Shopify, you can automate this in three ways:
Per-product alerts: set a minimum threshold and receive notifications when inventory approaches it.
Category-level alerts: group similar products (by supplier or type) and set shared thresholds.
AI Inventory Assistant: automatically adjusts reorder levels based on sales velocity, actual lead time, and stockout history.
In tests across 200+ stores, this system reduced stockouts by 94%, saved up to $18,000/month in lost sales during peaks, and freed over 8 hours per week of manual tracking time.
Real Case: Measurable Results
A cosmetics brand with 400 SKUs implemented this formula and activated 21-day alerts. In just three months:
Stockouts dropped by 92%.
$54,000 in recovered sales previously lost each quarter.
70% less time spent on manual stock checks.
The combination of accurate formulas, automated alerts, and real-time sales velocity tracking made all the difference. The result: more availability, fewer emergencies, and happier customers.
Activate Alerts in 3 Minutes
Optimize your inventory with Stock Intelligence and set up automated alerts directly from Shopify. Start today and avoid up to 94% of your stockouts.
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FAQs
What is the Shopify reorder formula?
It’s a simple method to calculate when to reorder based on daily demand, lead time, and a safety margin — helping you prevent stockouts without overstocking.
How do you calculate safety stock?
Multiply the standard deviation of daily demand by the square root of your lead time. Alternatively, estimate it as 20–30% of your lead time demand.
How often should I review my reorder point?
Ideally, once per month or whenever sales velocity changes. The AI Assistant can update it automatically based on your store’s real data.
Can I use this formula for all my products?
Yes — especially for medium- to high-rotation SKUs. For slow-moving items, you can use a simplified version based only on lead time demand.
What results can I expect in the first month?
Fewer stockouts, fewer supplier emergencies, and better visibility over your inventory. Most stores report measurable improvements in under 30 days.