the eternal struggle - i either stock out right before a bump or overbuy and pay storage + tie up cash. how are you all actually calculating WHEN to reorder, not just guessing? lead times from my supplier are long so the timing really matters.
Here’s the framework I run, no fancy software required:
Reorder point = (average daily units sold x total lead time in days) + safety stock
Where total lead time = production + shipping + Amazon receiving/check-in time (people forget that last one, it can be 1-2+ weeks).
Safety stock = a buffer for demand spikes and lead-time variability. I size it based on how badly variable my sales are and how long my lead time is. Long lead time + spiky demand = bigger buffer.
Then: when available + inbound inventory drops to the reorder point, I place the next PO. Not when I’m “getting low” by vibes - at the calculated number.
The two refinements that matter most:
- Account for seasonality - raise the reorder point heading into your busy season.
- Use available PLUS inbound, so you don’t double-order when stock is already on the water.
Kev’s formula is exactly right. The mistake I see most: people use production + freight as lead time and forget the Amazon receiving lag. Your stock can be “delivered” to the warehouse and still not be sellable for a week or two. If you don’t include check-in time, your reorder point is structurally too low and you’ll stock out during the gap.
My other rule: track days-of-cover (units on hand / daily sales rate) as a single dashboard number per SKU. When days-of-cover < total lead time, you’re already late. It’s the early-warning version of the reorder point.
And weigh the two failure modes by cost, they’re not equal. A stockout on your hero SKU costs you sales AND rank AND it hands momentum to competitors - expensive and hard to undo. Overstock costs you storage and tied-up cash - annoying but recoverable. So I bias my safety stock toward not stocking out the products that actually carry the business, and run leaner on the marginal SKUs. Don’t apply one buffer to everything.
cash flow is the silent constraint nobody mentions in these formulas. the “right” reorder quantity assumes you have the money sitting there. in reality i’ve under-ordered a winner plenty of times purely because cash was tied up in slower stuff. which is its own lesson - dont let dogs eat the capital your winners need.
the receiving-lag point is the one that’s been killing me, i was calculating lead time as factory + freight only. adding 2 weeks of check-in buffer to my reorder point immediately. and @the_reseller_mike yeah, the cash flow thing hurts because its true.
the receiving-lag point kev made is the killer for me too. but the thing that bites tech accessories specifically is variation-level forecasting. my ‘product’ is really 30 sub-products and they sell at wildly different rates. one buffer across all of them = i stock out of the popular color and drown in the unpopular one. i forecast and set reorder points per child SKU now, its more work but its the only thing that actually works.