Safety stock = max(0, maximum daily demand × longest lead time − average daily demand × usual lead time). Reorder point adds the expected lead-time demand to that buffer, rounded up to whole pieces.
Position = on hand + on order − backorders
If position is at or below the reorder point, order up to average demand × (usual lead time + review period) + safety stock. The order rounds up to your pack multiple. Above the trigger, the suggested order is zero.
Use the model carefully
Does this guarantee stock availability?
No. The result depends on your demand and lead-time estimates. Seasonality, promotions, expiry, supplier minimums and cash constraints are outside this simple model. Review against your actual history.
Why use inventory position?
It includes incoming replenishment and outstanding demand, reducing duplicate orders. Only count incoming quantities you expect to receive in the relevant planning window.
Worked example
Illustrative inputs and outputs to help you check your own task.
A replenishment suggestion rounded to full packs
Inputs
Average demand 10/day, maximum 15/day; usual lead time 7 days, longest 10 days; review period 7 days; on hand 130, on order 20, backorders 10; order pack 24.
Output
Safety stock 80; reorder point 150; inventory position 140; target 220. The 80-piece gap rounds up to a suggested 96 pieces.
This uses a worst-case demand and lead-time buffer. It is not a forecast or a supplier order.
Stock above the reorder trigger
Inputs
Use the same demand, timing and pack settings, but change on-hand stock to 250. Keep on order 20 and backorders 10.
Output
Inventory position is 260, above the 150-piece reorder point. The suggested order is 0.
Check that on-hand, on-order and backorder quantities all use the same unit before comparing them.
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