1. Calculate average daily sales
Use a recent representative period and divide units sold by the number of selling days.
2. Enter supplier lead time
Measure from placing the purchase order until stock is available for sale.
3. Choose safety coverage
Add buffer days for demand variation or supplier delays.
4. Enter inventory position
Provide available units and any confirmed units already on order.
5. Review timing and quantity
Place the order when inventory position approaches the reorder point, subject to supplier minimums and cash constraints.