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What Is a Reorder Point for a Fuel Tank?
A reorder point is the tank level at which you order the next fuel delivery. It is set high enough that the fuel still in the tank covers what you will use while you wait for the truck, with a margin left over for a late delivery or a busy week.
Order well above it and you take smaller, more frequent deliveries. Order below it and you risk running the tank dry before the truck arrives.
Working out a reorder point
The calculation needs three numbers: how much fuel you use a day, how many days a delivery takes from the order to the drop (the lead time), and how much you want left in the tank when the truck arrives (the safety stock).
reorder point = daily usage × lead time in days + safety stock
Say a tank holds 10,000 gallons, the site uses 400 gallons a day, a delivery takes 3 days from the order, and you want 800 gallons left as a margin. The reorder point is 400 × 3 + 800 = 2,000 gallons: when the gauge reads 2,000 gallons, you place the order. The delivery is then sized to the room the tank will have when the truck arrives, up to its safe fill level. These figures are chosen to show the math; they are not typical of any site.
Why one number does not fit every month
Daily usage is rarely flat. A site that burns fuel for heat uses more in a cold week than in a mild one, so a reorder point set in early autumn can be too low by midwinter. A site that runs equipment follows its work instead: a harvest, a construction season or a new route changes the daily figure.
For heating, one way to adjust is by degree days. In EIA’s description, a heating degree day indicates a cold day and measures how much heating is needed to keep a building warm. EIA counts them by comparing the day’s mean outdoor temperature with a base of 65°F: the further below it, the more degree days the day counts. Dividing a site’s usage over a period by the heating degree days in that period gives usage per degree day, which can then be scaled to a colder or milder forecast.
Lead time can change too, for example when supply at the terminal is tight and a fuel allocation runs short. A longer lead time needs a higher reorder point.
Reorder point, keep-full and will-call
A reorder point is one way a fuel buyer and supplier decide when the next delivery happens. Names vary between suppliers, but the arrangements in use look like this:
- Will-call. The buyer watches the tank and calls in an order when it needs one. A reorder point is the rule the buyer uses to decide when to call.
- Keep-full. The supplier schedules deliveries from its own estimate of the buyer’s usage and keeps the tank topped up, so the buyer does not place each order.
- Scheduled delivery. A delivery on a fixed day or interval, sized to what the tank can take at that point.
Under any of them, someone is working to a reorder point, written down or not: the level at which the next truck has to be on its way. Whatever arrives is recorded on the delivery ticket, in gross or net gallons.
Sources
- EIA Energy Explained: Degree days: heating degree days measured against a 65°F base, and heating degree days as a measure of the heating a building needs