Reorder Point Formula with a Worked UAE Import Example

The reorder point formula is: reorder point = (average daily demand × lead time in days) + safety stock. For a UAE importer buying from China, the lead time must cover the whole trip, from factory production to stock on your shelf. If you use only the supplier's quoted production time, you will reorder too late.

This guide gives you the formula, a worked example with China to Jebel Ali lead times, and a checklist you can apply to each SKU this week. The numbers in the example are hypothetical. Replace them with your own.

What is the reorder point formula?

The basic reorder point formula is lead time × demand rate, plus safety stock. You calculate it separately for each item.

Here are the three inputs:

• Average daily demand: total sales divided by the number of days in the period. Use a recent period, such as the last 90 days.
• Lead time: the time from placing the order until the supplier delivers it. For an importer, "delivers" means the goods reach your warehouse or marketplace receiving point.
• Safety stock: extra units held for surprises. It is a trade-off between stockout risk and the cost of carrying extra inventory.

When on-hand plus incoming stock falls to the reorder point, you place a new purchase order. Say your reorder point is 1,180 units. You order when your stock position hits 1,180, not when the shelf is empty.

What lead time should a UAE importer use for China orders?

Use the full pipeline: production, inland haulage in China, sea freight, port and customs clearance, and delivery to your warehouse. Total lead time should include manufacturing, freight, customs and marketplace receiving time, not the factory quote alone.

Sea transit from China to Jebel Ali varies by source and origin port. These are commercial forwarder estimates, not official figures, and they disagree. Treat them as a starting range only.

Shorter estimates exist too, such as 15–22 days port to port. The spread is the point. Your own forwarder's booking history is a better input than any website.

Production time is not in the table because it depends on your supplier and order size. Ask for it in writing.

Also watch free time at the port. Jebel Ali applies storage and demurrage once free time expires. A delayed delivery order or clearance can add both days and cost. For Jebel Ali, DP World handles terminal operations and delivery orders go through the Dubai Trade portal, so build in time for that step.

If you import into Saudi Arabia through Dammam or Jeddah, the method is identical. Only the stage durations change. Take them from your own forwarder's past shipments.

How do you calculate the reorder point step by step?

Follow these six steps for each SKU.

1. Find average daily demand. Divide units sold in the last 90 days by 90. Include sales from your website, noon, Amazon.ae and any B2B orders.
2. Add up the lead-time stages. Production, inland China, sea freight, customs and delivery. Use real figures from past shipments.
3. Multiply demand by lead time. This is the stock you expect to sell while the order is on its way.
4. Choose a safety stock method. See the next section.
5. Add safety stock to lead-time demand. The total is your reorder point.
6. Compare it to inventory position, not shelf stock. More on this below.

Worked example: a Dubai trading company

This example is hypothetical. Say a Dubai company sells phone accessories on noon and its own website. One SKU sells 20 units a day.

• Lead-time demand = 20 units × 45 days = 900 units.
• The company wants a 14-day buffer. Safety stock = 20 × 14 = 280 units.
• Reorder point = 900 + 280 = 1,180 units.

When the stock position reaches 1,180, the company places the purchase order. If the ship arrives on schedule, the buffer of 280 units is still on the shelf.

How much safety stock do you need?

Safety stock should match how unreliable your demand and lead time are. There are three common methods.

The max-minus-average method works like this in Sortly's example: max usage 50, average 30, max lead time 20 days, average 15. Safety stock is (50×20) − (30×15) = 550, and the reorder point is 450 + 550 = 1,000 units.

Apply it to our hypothetical SKU. Say peak demand was 30 a day and the slowest shipment took 60 days:

• Safety stock = (30 × 60) − (20 × 45) = 1,800 − 900 = 900 units.
• Reorder point = 900 + 900 = 1,800 units.

That is much higher than 1,180. It shows why lead-time variance matters on long routes. A shipment that slips by two weeks costs far more stock than a small demand spike. The statistical method uses a service factor, demand standard deviation and the square root of lead time.

To find your average lead time, add the lead-time days over the past 6 to 12 shipments and divide by the number of shipments.

More safety stock means more cash tied up. Pick a level you can afford.

Why compare the reorder point to inventory position?

Compare the reorder point to your inventory position, not shelf stock. Inventory position is on hand plus on order, minus stock allocated to customer orders and backorders.

Take our example. Say you have 700 units on the shelf, 600 units on a ship, and 50 units allocated to open orders.

• Inventory position = 700 + 600 − 50 = 1,250 units.
• That is above the 1,180 reorder point, so you do not reorder yet.

If you only looked at the shelf, 700 is below 1,180 and you would double-order. Many importers over-order this way.

Two UAE-specific cautions:

• Multiple warehouses and channels. If stock sits in a Dubai warehouse, a KEZAD or Jebel Ali free-zone unit and marketplace receiving, count each location. Do not count stock that is not yet sellable.
• COD returns. Cash-on-delivery parcels that come back are not stock until you receive and inspect them. Add them back only then.

Quickship's Inventory module is built for multi-warehouse stock with Amazon, noon and Shopify sync, so the numbers behind this calculation sit in one place.

How do you turn the reorder point into an order?

The reorder point is a trigger, not a licence to overstock. It says when. You still choose how much.

In a min-max setup, the min is the reorder point and the max is the level you order up to. EOQ is one way to size the order: √((2 × annual demand × ordering cost) ÷ holding cost).

In practice, a China order is also limited by container space, supplier minimums and your cash. Put these on the purchase order:

• Quantity per SKU, from your max level minus inventory position.
• Required ready date, based on your 15-day production assumption or the supplier's real figure.
• Payment terms and who pays port charges.

If you manage RFQs and purchase orders by email, the Sourcing module keeps supplier quotes and POs in one place.

Common mistakes to avoid

• Using the factory's production time as the lead time. Add freight, customs, port and delivery.
• Using one figure for every route. Shanghai and Qingdao differ. LCL differs from FCL.
• Ignoring port delays. Free time runs out. Demurrage at Jebel Ali is a real cost.
• Using one reorder point for every SKU. Each item needs its own calculation.
• Never updating the numbers. Review demand and lead time on a schedule.
• Counting stock that is not sellable. Damaged goods, held-back stock and unreceived COD returns do not count.

Checklist before your next China order

1. Pull the last 90 days of sales per SKU across all channels.
2. List the actual lead time of your last 6 to 12 shipments.
3. Calculate the reorder point with the formula above.
4. Check inventory position, not just shelf stock.
5. Place the order when the position falls to the reorder point.
6. After the shipment lands, record the real lead time and update the average.