SnodoMost small distributors reorder on feel. You walk the aisle, a shelf looks thin, you call the supplier. Or a customer asks for something you don't have, and that's how you find out you should have ordered last week.
Feel works for a while. It stops working when you carry a few hundred SKUs, buy from a dozen suppliers, and some of them take a week to deliver while others take two months. That's when you get both problems at once: you're out of the things that sell and full of the things that don't.
There's a simple number that replaces the guess. It's called the reorder point, and you can work it out for any product with three inputs you already have.
The reorder point, in one line
Reorder point = average daily sales × lead time (in days) + safety stock
When the stock on hand (minus anything already promised to customers) drops to that number, you place the order. Not before, not after.
Here's what each part means:
- Average daily sales: how many units of that product you sell on a normal day. Take the last 60 to 90 days of sales and divide by the number of days. For something that's clearly growing or shrinking, use a shorter window, like the last 30 days.
- Lead time (days): how many days pass between placing the order and having the product on your shelf, ready to sell. That's the real number, not the one on the supplier's quote. Count receiving and put-away too.
- Safety stock: a small cushion for the days when you sell more than usual or the truck shows up late.
The first two parts together (daily sales × lead time) answer the question: how much will I sell while I wait for the new order to arrive? Safety stock covers you if that wait goes badly.
A worked example
Here are four products from a made-up distributor. This is sample data for illustration only, not from a real business.
| SKU (sample) | Avg. daily sales (units) | Lead time (days) | Sales during lead time | Safety stock (units) | Reorder point |
|---|---|---|---|---|---|
| 3/8" hex bolts, box of 100 | 12 | 7 | 84 | 30 | 114 |
| Clear silicone sealant, case | 4 | 10 | 40 | 14 | 54 |
| Grey cement, 94 lb bag | 20 | 5 | 100 | 40 | 140 |
| Imported PVC fittings, box | 2.5 | 45 | 112.5 | 35 | 148 (rounded up) |
Take the hex bolts. You sell about 12 boxes a day and the supplier takes 7 days to deliver. While you wait you'll sell about 12 × 7 = 84 boxes. Add 30 boxes of safety stock and the reorder point is 114. When you get down to 114 boxes, place the order.
Look at the PVC fittings. They sell slowly, only 2.5 boxes a day, but they take 45 days to arrive. Their reorder point (148) is higher than the cement's, even though cement sells eight times faster. This is where reordering by feel breaks down: a slow product with a long lead time has to be ordered when the shelf still looks full.
Safety stock, the simple way
You don't need a statistics degree to set safety stock. Start with days of cover: decide how many extra days of sales you want as a cushion, then multiply.
Safety stock = average daily sales × buffer days
In the table above, the buffer days were:
- Hex bolts: 2.5 days (12 × 2.5 = 30). Reliable local supplier, steady sales.
- Silicone: 3.5 days (4 × 3.5 = 14). Sales jump around a bit.
- Cement: 2 days (20 × 2 = 40). Very steady, short lead time.
- PVC fittings: 14 days (2.5 × 14 = 35). Imported, and shipping dates slip.
Rules of thumb for picking buffer days:
- The less reliable the supplier, the more buffer. If deliveries sometimes come a week late, your buffer should cover at least part of that week.
- The more sales swing, the more buffer. A product that sells 2 one day and 10 the next needs more cushion than one that sells 5 every day.
- The more it hurts to run out, the more buffer. Your top sellers and the products your best customers depend on deserve more cushion than the long tail.
Once you have a few months of clean data, you can move to the statistical method (it uses the standard deviation of daily sales and a target service level). It gives more precise numbers, but days of cover is far better than no safety stock at all, and it's easy to explain to the person doing the buying.
Common mistakes
1. Using the supplier's quoted lead time. If they say 7 days and it really takes 11, every reorder point you set is short by 4 days of sales. Look at your last 6 to 12 purchase orders and use the average of what actually happened.
2. Counting stock that's already spoken for. If 40 units are on the shelf but 25 are committed to an open order, you have 15 to work with. Compare the reorder point against available stock, and count stock already on order with the supplier.
3. Averaging over stockout days. If a product was out of stock for two weeks, those zero-sales days weren't low demand. You had nothing to sell. Leave them out of the average or your daily sales will come out too low, and you'll run out again.
4. Setting it once and forgetting it. Sales change, suppliers change, seasons change. Recalculate at least every quarter, and monthly for your top sellers.
5. One rule for every product. "Always keep two weeks of stock" sounds tidy, but it overstocks fast movers with short lead times and leaves you short on slow imports. Each SKU needs its own number.
6. Ignoring seasonality. A 90-day average taken in January will badly undershoot a product that peaks in summer. For seasonal products, look at the same period last year.
7. Confusing when with how much. The reorder point tells you when to order. How much to order is a separate decision that depends on supplier minimums, pack sizes, shipping costs and how much cash you want tied up.
When spreadsheets stop scaling
You can do all of this in a spreadsheet, and for a few dozen products you should. It's the best way to understand your own numbers.
But watch for these signs that the spreadsheet is starting to cost you:
- Hundreds of SKUs. Updating sales averages and lead times by hand every month takes hours, so it stops getting done and the numbers go stale.
- Data in three places. Sales in the POS or ERP, purchase orders in email, stock counts on a clipboard. Every update means copying and pasting.
- One person who understands the file. If the purchasing manager is out for a week, nobody else knows which tab to trust.
- You still get surprised. You have reorder points, yet you still run out of best sellers or find dead stock in the back. Usually that means the inputs are out of date.
- Seasonal and new products. Simple averages don't handle peaks or items with no sales history, and adjusting them by hand gets messy fast.
At that point, more formulas won't fix it. What helps is having the numbers update themselves from the systems you already use, so that once a week you get one clear answer: order these products, in these amounts, this week.
See it, or talk it through
That's what we do at Snodo. We connect to the sales and purchasing data you already have, keep the forecasts and reorder points current, and send you the order list. You don't learn new software. We do the work and send you the answer.
- Watch the 60-second demo: https://youtu.be/pmdyEpofoYE
- Book a free 20-minute call: snododata.com/schedule. Twenty minutes, free and with no strings. We'll tell you plainly whether we can help, how, and what it would cost.