How to set reorder points before your best sellers run out

“We still have a few hundred units” sounds reassuring until you compare that stock with daily demand and the time needed to replace it. A product can be weeks away from its next delivery and only days away from selling out.

A reorder point gives your team a clear signal to act. The useful version accounts for demand, replenishment lead time and a buffer for uncertainty. It also checks what is already committed or on the way.

Start with your most important SKUs. You can improve the process without building a complicated forecasting system on day one.

Calculate the basic reorder point

The standard starting calculation is:

Reorder point = expected demand during replenishment lead time + safety stock.

With reasonably steady demand, lead-time demand can be estimated as average daily unit demand multiplied by replenishment days. Shopify's reorder-point guide explains this basic relationship.

Consider a hypothetical product selling 12 units per calendar day. Its replenishment lead time is 24 calendar days, and the business chooses an initial safety-stock allowance of 72 units.

The 72-unit buffer equals six days of demand in this example. It is an illustrative planning choice, not a statistically calculated service guarantee. Set your own buffer using demand variation, delivery reliability, product value and the consequences of a stockout.

Count lead time until inventory is available to ship

A supplier's production estimate is only one part of replenishment. Include order approval, manufacturing or supplier preparation, transport, any clearance process, delivery appointments, receiving and the time required to make stock available in your system.

In the example above, 24 days might consist of 12 days of supplier preparation, eight days of transit and four days for delivery and receiving. Those are hypothetical components; measure your actual purchase orders from approval to usable inventory.

Keep time units consistent. Do not multiply calendar-day demand by a lead time stated in working days without converting it. Account for closures and holidays when they affect a particular purchase order.

Track the spread as well as the average. A route that usually takes three weeks but sometimes takes six needs more attention than an average alone reveals.

Check inventory position and arrival dates together

Looking only at stock on the shelf can trigger duplicate purchasing. Looking only at total stock on order can hide an imminent shortage.

For a simple planning view, calculate inventory position as usable on-hand stock plus confirmed inbound stock, less demand already committed and not already deducted. Keep the definition consistent across your inventory system and purchasing sheet. Do not subtract the same allocation or backorder twice.

Suppose there are 260 usable units on hand, 40 units committed and 100 confirmed units inbound. The planning position is 320 units. That is below the example reorder point of 360, so the buyer should review replenishment.

Then check dates. An inbound shipment arriving after the expected stockout cannot cover the gap just because it appears in the total. Project available stock through each expected receipt date, using future demand that does not double-count the commitments already subtracted.

Treat damaged, quarantined or otherwise unsellable stock separately. A physical count and a sellable quantity are different things.

Set the purchase quantity as a separate decision

The reorder point tells you when to act. It does not automatically tell you how much to buy.

Your purchase quantity depends on expected demand, supplier minimums, case packs, cash availability, shelf life and the amount of stock you are willing to hold. If you buy only once a month, the order may need to cover more than the supplier lead time.

Before approving a purchase order, show the expected stock position at arrival and the projected weeks of cover after receipt. Include existing purchase orders so the new order does not create a second, hidden wave of inventory.

For products with expiry dates or short selling seasons, check whether the proposed quantity can realistically sell within the available window. Extra stock is not useful protection if it becomes unsellable first.

Adjust for promotions, bundles and stockout history

A simple average works poorly when next month's demand will differ materially from the past. Add planned launches, promotions, subscriptions and known wholesale commitments explicitly.

Use component-level demand for bundles. If one kit consumes two units of a component, twenty kit orders use forty of those units before standalone sales are considered. A bundle can appear available while one component quietly becomes the constraint.

Also identify periods when an item was unavailable. Recorded sales during a stockout understate the demand you could have served. Use an appropriate in-stock comparison or a labelled forecast assumption instead of treating those zero-sale days as normal demand.

Avoid automatically placing the largest possible buffer on every SKU. A high-value slow seller, a fast-moving essential and a seasonal item need different purchasing decisions.

Give every alert an owner and a next action

A low-stock notification does not place a purchase order, confirm a delivery date or resolve a shortage. Assign an owner who checks the signal and records the action.

A practical replenishment sheet should show the SKU, usable stock, commitments, confirmed inbound quantity and date, expected demand, lead time, reorder point and proposed action. Add the date the figures were updated.

Review important fast-moving products more frequently than stable slow sellers. The appropriate cadence depends on how quickly demand and supply can change; a weekly review may be too slow during a launch.

Bring purchasing, marketing and warehouse information into the same review. Purchasing knows what was ordered. Marketing knows what is about to sell. The warehouse knows what has actually arrived and can be shipped.

If inventory visibility or receiving delays are making planning harder, discuss your fulfillment workflow with 247. Start with a small set of important SKUs and trace the gap between the purchase order, the physical stock and the quantity available to customers.