In this guide 6 sections
A fixed minimum fails. Lead time and demand keep moving while the number stays still, so the alert comes late for fast items and every morning for slow ones. Recalculate each level from daily sales, lead time and a safety buffer, per item and outlet, and send the alert to whoever can place the order.
Why one fixed minimum stops working
Someone typed a minimum of twenty against a fast moving item two years ago, and the number has not been touched since. Sales have doubled since, the supplier now takes nine days instead of four, and the alert still fires at twenty, which is two days of stock. You run out every time.
The opposite fault is just as common. A slow item keeps a high minimum from one good season, so its alert fires every single morning until the purchase manager stops opening the list. Then the one alert that matters goes unread.
- Minimum set once and never reviewed
- Same level copied across every outlet
- Lead time taken from the supplier’s promise, not real receipts
- Seasonal items kept at peak levels all year
Work out the reorder level from three inputs
The level is average daily sales times lead time in days, plus a safety buffer, and each of the three inputs comes from your own records. Use issues, not stock counts, for sales over the last eight to twelve weeks, and skip any week distorted by a stock-out. Empty shelves record zero sales.
Take lead time from the gap between purchase order date and goods receipt on the last five orders, not from the supplier’s quote. Fast movers get the longer end. The buffer absorbs a late truck, a strike at the transporter, and the odd contractor who buys the whole shelf in one visit.
Try it on one real item. Sales of twelve a day and a nine day lead time give one hundred and eight units before any buffer, against the old minimum of twenty.
Set it per item and per outlet
A main road shop can outsell a lane branch tenfold. One level cannot fit both. Set a level for each item at each outlet, and give the central warehouse its own level for resupply, so transfers are planned instead of begged for.
Group items by how they move. Fast items get a monthly review, slow items get one each quarter, and goods with a short expiry date need their own rule because over-ordering carries a real cost.
- Daily sales by item and outlet
- Receipt history for each supplier
- Pack size and minimum order quantity
- Expiry or shelf life where it applies
Send the alert to someone who can act
A red flag nobody opens is no alert. Send the warning to the outlet manager for transfers and to the purchase manager for supplier orders, with the item, current stock, stock on order and a suggested quantity.
Count stock on order. Without it the alert fires again the morning after you raise the purchase order, and the buyer orders the same item twice from the same supplier. Escalate to a second person when no order appears within a set number of hours, for example by the end of the next working day.
Review the levels on a calendar
Put a monthly review on the calendar for the top fifty items by sales, and check each one for stock-outs and for excess. Keep the habit. An item that ran out needs a higher level, and one that sat on the shelf for weeks needs a lower one.
Begin this week. Take the ten items that ran out most often last month, recalculate their levels from the formula, and compare the new alerts with the old ones.
Reorder level worksheet
One row for each item and outlet. Columns hold average daily sales, the last five lead times, safety days, the current minimum, the new reorder level, stock on order and the alert owner. A footer block records the monthly review date and every item that ran out since the last review, with the cause beside it.
Open a blank worksheet to printQuestions owners ask
How many weeks of sales should I use?
Eight to twelve weeks suits most steady items. Use a longer window for seasonal lines, then skip any week when the item was out of stock or the shop stayed shut for a festival.
What is a safety buffer?
It is a cushion of extra days of stock, held back against late deliveries, transporter strikes and sudden bulk orders from contractors. Give unreliable suppliers more days.
Should every outlet have its own level?
Yes for fast items, since sales differ by location. Slow items can share a level at first, then split it once the sales data shows a clear gap between the busy branches and the quiet ones.
Why does the alert fire again after I have ordered?
The system is not counting stock on order. Include open purchase orders in the available figure, so that the alert clears the moment the order is placed and returns only if the stock still falls short.