Reorder point calculator: safety stock, EOQ and days of inventory, with Amazon FBA storage

The reorder point covers what you will sell while the next order is on its way, plus a buffer for days when sales run above average. The buffer, safety stock, grows with how much your sales vary, with the square root of the lead time and with the service level you choose.

With 10 units a day, a standard deviation of 4 and a 14-day lead time at 95%, safety stock is 1.65 × 4 × √14 = 24.7, rounded up to 25, and the reorder point is 10 × 14 + 25 = 165. When stock falls to 165 units, order.

The service factor is the number of standard deviations of lead-time demand you keep in stock. It comes from the normal distribution: in Excel or Google Sheets, =NORM.S.INV(0.95) returns 1.645 (this page uses 1.65). Going from 95% to 99% adds 10 units of safety stock in the example; going from 90% to 95% adds 5.

EOQ is the order size that balances the fixed cost of each order against the cost of holding stock: EOQ = √(2 × annual demand × cost per order ÷ holding cost per unit per year). With 10 units a day (3,650 a year), $50 per order and $2 per unit per year to hold, EOQ = √(2 × 3,650 × 50 ÷ 2) = 427 units, about 42.7 days of sales per order.

EOQ assumes steady demand and a price that does not change with quantity. If your supplier has a minimum order quantity above the EOQ, or a price break at a larger quantity, compare the total cost of both order sizes instead.

Amazon charges a monthly storage fee on the average daily volume of your inventory in cubic feet. The base fee for non-dangerous goods is $0.78 per cubic foot for standard-size and $0.56 for oversize in January–September, and $2.40 and $1.40 in October–December. Professional sellers whose storage utilization ratio (inventory volume ÷ shipped volume over 13 weeks) is 22 weeks or more pay a surcharge on top, from $0.44 per cubic foot for standard-size; new sellers, individual sellers and sellers with 25 cubic feet or less are exempt.

An 8 × 6 × 4 in unit is 192 cubic inches, or 0.111 cubic feet: $0.09 a month in January–September and $0.27 in October–December. Holding 25 units of safety stock through the holiday months costs $6.67 a month; holding too much ahead of the holidays is what pushes the utilization ratio past 22 weeks.

Days of inventory on hand = units on hand ÷ average daily sales. With 300 units and 10 sold a day you have 30 days of stock, and 13.5 days until you reach the 165-unit reorder point. For a whole store, the accounting version is average inventory ÷ cost of goods sold × 365.