Prepare demand and lead-time assumptions before setting an order quantity.
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
| Source | Convention | Result | Next check |
|---|---|---|---|
| Record the measured or supplied values. | State units, period and inclusions. | Retain the original calculation. | Name the person and evidence needed before use. |
Continue the decision
EOQ vs Reorder Point: Two Inventory Questions, Not One · How to Build a Marketing Budget Around Business Targets.
Keep the displayed formula, input units and model scope with the result. Corrections or questions can be sent through the request section on this page.