Inventory formulas & live inventory calculators

Welcome to the Unleashed inventory formulas and calculators page. Designed as a resource for busy product companies, it’s where you’ll find live calculators for the safety stock formula, reorder points, the EOQ equation, the inventory turnover formula & more.

You can also dive deeper with articles on how each inventory formula works – and how to use them – plus explore some video guides

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Maximum daily use x Maximum lead time in days
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Average daily use x Average lead time in days
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Safety stock

The safety stock formula is:

Safety stock = [ Maximum daily use x Maximum lead time ] – [ Average daily use x Average lead time ]

Safety stock calculator

Use the safety stock calculator to work out how much stock you should hold in reserve for each product or component in your warehouse.

Once you know your safety stock figures, you can use the reorder point calculator below to determine the level of inventory at which you should replenish goods.

Be aware: Because your safety stock figures are based on historic data you should sense-check them against what you know about your business. Are sales trending up or down? Do you have promotions running – or ending – soon? Factors like these will affect your ideal safety stock levels.

Learn more: Everything you need to know about calculating safety stock

The reorder point formula is:

Reorder point = ( Average daily usage x Average lead time in days ) + Safety stock

Reorder point calculator

When you’re armed with a reorder point for each product or component, you know the level at which to order more goods so you don’t run out before new stock arrives.

Be aware: Because your reorder point is calculated from historic data, changes in (and outside) your business will affect your ideal reorder levels. For example supply chain disruptions that add to lead times will see you needing to order stock earlier than expected. Sense check your reorder points against what you know about your business, and recalculate them regularly.

Next steps: Enter your reorder points into Unleashed’s inventory management system. Unleashed’s automated low stock alerts will then prompt you to purchase more when you reach your reorder point, ensuring you never run out of your important items – while keeping your stock levels lean.

Learn more: The Reorder Point Formula: Everything You Need to Know

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Average daily usage x Average lead time in days
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Safety stock
Reorder point
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2x Annual demand in units x Order cost per Purchase Order
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Annual holding cost per unit
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EOQ

The economic order quantity formula is:

EOQ = √((2 x Annual demand in units x Order cost per Purchase Order) ÷ Annual holding cost per unit)

Economic order quantity calculator

You can use the EOQ calculator to work out how much of a product you should order at a time. Effectively the equation balances the costs of ordering, shipping and handling goods against the costs of holding them in your warehouse.

Be aware: There are several assumptions to be aware of in the EOQ equation, not least that order costs remain the same regardless of the size of the shipment. It also doesn’t take in to account things like product expiry. So while an EOQ calculation might recommend buying large volumes and storing them until use, that will be less relevant if you deal in perishable goods.

Next steps: You can determine an ideal order quantity in Unleashed by setting minimum and maximum stock levels for each product. When you reach a minimum stock level you will be prompted to re-buy, with the purchase order pre-populating with a quantity that will get you up to your maximum level. Reorder point and EOQ figures can therefore be a useful guide in setting min and max stock levels in Unleashed.

Learn more: What is Economic Order Quantity?

The inventory turnover formula is:

Inventory turnover = Cost of Goods Sold [Beginning inventory value + Purchases made - Final inventory value] ÷ Average inventory [Beginning inventory value + Final inventory value ÷ 2]

Inventory turnover calculator

The result of this equation – known as the inventory turnover ratio – tells you how many times in a year you completely replaced your stock.

Be aware: It’s no longer best-practice to manually calculate your inventory turnover. While using the calculator will be a useful exercise in understanding your business, you’re far better using a modern inventory management system that tracks and calculates your inventory turnover in real time – and can spot fast and slow-moving items, product categories & even regions.

Next steps: Get to grips with what modern inventory management software can do in this 25-minute demo of Unleashed’s core features.

Learn more: The Inventory Turnover Formula: Calculating Inventory Turnover

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Beginning inventory value + Purchases made - Final inventory value
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Cost Of Goods Sold
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Beginning inventory value + Final inventory value ÷2
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Average inventory
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COGS
Average inventory
Inventory turnover ratio
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Beginning inventory value + Ending inventory value
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Average inventory value

The average inventory value formula is:

Average inventory value = (Beginning inventory value + Ending inventory value) ÷ 2

Average inventory value calculator

Monitoring your average inventory value is an important part of keeping your inventory costs under control. You also need to know your average inventory when calculating inventory turnover.

Be aware: The phrase ‘average inventory’ can refer to both the number of units held, or the value of stock. In an inventory accounting context, usually the phrase refers to a currency value. Here we’ve used ‘average inventory value’ to avoid confusion.

Learn more: How to Calculate Average Inventory – The Complete Guide

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