Reorder levels: how to stop running out of the things that sell

The simple arithmetic behind a reorder point — daily sales, lead time, a safety margin — and how to set one for every product in an afternoon so you stop discovering stock-outs from customers.

"Sorry, we're out" is the most expensive sentence in retail. The sale is lost, and worse, the customer now knows a shop that has it. Yet most stock-outs aren't bad luck. They're a product that sells three a day, a supplier who takes five days, and nobody noticing until the shelf is empty.

The fix is a number per product — the reorder level — and a habit of ordering when stock hits it. The number takes thirty seconds to work out. The habit is what software is for.

The arithmetic

Reorder level = (daily sales × supplier lead time in days) + safety stock

Daily sales: units sold per day, averaged over the last month or two. Use the busy season's figure if you're heading into it.
Lead time: days from placing the order to the goods being on the shelf. Be honest — "the rep says two days" usually means four.
Safety stock: the cushion for a busy week or a late van. A simple rule: half of what you'd sell during the lead time. More for products where a stock-out really hurts; less for slow, bulky, or perishable ones.

Example. A product sells 3 a day. The supplier takes 5 days. Safety stock: half of 15 = 7 or 8.

Reorder level = (3 × 5) + 8 = 23

When stock drops to 23, order. You'll receive the delivery with about 8 left on the shelf — the cushion doing its job.

How much to order

A second number, the reorder quantity, answers "how many". The practical answer for a small shop: enough for two to four weeks of sales, rounded to the supplier's pack size. Too little and you're ordering every few days; too much and cash sits on the shelf. For anything with an expiry date, never order more than you'll sell well inside its shelf life.

Reorder quantity ≈ daily sales × 21 days, rounded to the case

For the product above: 3 × 21 = 63 → one case of 60 or 72, whichever the supplier sells.

Setting them for a whole shop in an afternoon

You don't need a perfect number for every line. You need a sensible one for the lines that matter and a default for the rest.

Pull last month's sales by product and sort by units sold.
The top 20% of products — usually about 80% of sales — get a worked reorder level using the formula. That's perhaps a hundred products and an hour.
Everything else gets a default: one week of sales, or a flat minimum (say, 5) if the line barely moves.
Lead time per supplier, not per product. Three or four suppliers, three or four numbers.
Write them on the book or in the system. A reorder level in your head is not a reorder level.

Keeping them honest

Review the top lines quarterly. Sales change; a product that moved from 3 a day to 6 needs its level doubled, and the stock-out that tells you so is avoidable.
When you run out anyway, ask which input was wrong. Sales higher than averaged? Supplier later than promised? Safety stock too thin? Adjust that one input; don't just "order more".
Seasonal lines get two levels — in-season and out — and you switch them on the calendar, not when the shelf empties.
A product you keep running out of that also sits for months is two products: the customers who want it are bursty. Raise safety stock or accept the occasional gap; don't let it drive an enormous order.

The daily habit that makes it work

Every morning, one list: products at or below their reorder level. Order them, or decide not to. Five minutes. The list is the system; the arithmetic above just makes the list right.

Doing that list by hand means reading the whole stock book every morning, which is why it doesn't happen by hand for long.

What this looks like in Shopman

Every product has a reorder level and a reorder quantity — set on the product, or in bulk from a spreadsheet when you set the shop up.
Stock drops as you sell, so the comparison is live, not from last week's count.
Low-stock alerts run nightly and land in the notification bell and, if you switch them on, your inbox — graded by how far below the level a product has fallen, so the urgent ones read first.
The low-stock report is the morning list, ready-made, grouped by supplier so it turns into purchase orders in a click.
Purchase orders track what's on its way, so a product that's been ordered doesn't nag you again.

Low-stock alerts are on every plan, including the free one.

Start free — set your first twenty reorder levels today

Frequently asked

What if I don't know my daily sales? Count what's on the shelf, count again in two weeks, add what you received in between. Sales = start + received − end. Two weeks of that for your top products is enough to start; the software keeps it from then on.

Should the reorder level include stock already on order? Compare against stock on hand plus stock on order. A product below its level with a delivery due tomorrow doesn't need ordering again — that's the most common cause of over-stocking.

Is a reorder level the same as a minimum stock level? In practice, yes: both name the point at which you act. "Minimum" suggests you never go below it; a reorder level expects you to dip into the safety stock while the delivery is on its way — that's what the safety stock is for.