Low Stock Alerts and Reorder Points That Actually Work

Every shop owner has a low-stock level in their head. For most items it is wrong. Either it's set so high that half the catalogue is always flagged, and the list gets ignored, or so low that you find out about the shortage when a customer asks and you have to say 'tomorrow'.

A reorder point is just the stock level at which you should place the next order so the new goods arrive before you run out. It has two ingredients you already know: how fast the item sells, and how long the supplier takes to deliver. The rest is a little arithmetic and some honesty about your suppliers.

The basic formula, in plain words

Reorder point = (average daily sales x supplier lead time in days) + a safety cushion. That's all.

Take a packet of phone chargers. Say you sell about 4 a day and your distributor takes 3 days to deliver. During those 3 days you'll sell around 12. So if you reorder when stock hits 12, the new lot lands just as the last one goes. That is zero margin for error, so you add a cushion, perhaps 6 more, and reorder at 18. These are illustrative numbers; use your own.

Find your real lead time

The lead time printed in your head is usually the best case. Look at your last few purchase bills for the item and compare the order date to the date the goods actually reached the shop. Use the slow end of that range, not the average. If a supplier says two days but delivers in two to five, plan for five.

Remember that lead time includes your own delay. If you only review stock on Saturdays, a Monday dip below the reorder level won't be noticed for five days. Your effective lead time is supplier time plus the gap between reviews.

Estimate sales speed without overthinking it

Use the last month or two of sales for that item, divided by the number of days. If the item is seasonal, say umbrellas or school notebooks, use the season's rate, not the yearly average. Reports by date range help here; being able to pick this week, this month or a custom range makes the comparison quick instead of a spreadsheet job.

Do not set reorder points for everything on day one. Start with your top 20 items by sales and the ones that hurt most when they are missing. Set those carefully, run them for a month, then widen the list.

What a low-stock list should do for you

In Billy, products and stock carry low-stock items, so you can see which products have fallen below the level you set. Treat that list as a to-do for the purchase desk, not as a report to admire. We would not claim it orders for you; it shows you what needs ordering, and you decide quantities and suppliers.

1. 1Open the low-stock list at a fixed time, say every morning before the shop opens
2. 2Check each item for a pending order, since you may already have bought it
3. 3Group the rest by supplier so you place fewer, larger orders
4. 4Raise a purchase order for each supplier, as in our purchase order to purchase bill workflow
5. 5Note the expected delivery date so the order doesn't get forgotten

Common mistakes with reorder levels

• Setting every minimum to the same number, like 10, regardless of how fast the item sells
• Ignoring pending orders and ordering twice for the same shortage
• Never revisiting the levels after a season or a price change
• Raising the level every time you run out, until cash is tied up in slow items
• Trusting the stock number when it hasn't been counted in months

That last one matters most. A reorder point is only as good as the stock figure it watches. If your numbers are shaky, fix them first with a stock audit, otherwise the alerts are noise. And keep an eye on the other end too: items that never reach their reorder point may be dead or slow-moving stock.

Review twice a year, not every day

You don't need to fiddle with these numbers daily. Revisit your top items every quarter or when a supplier changes. A good rule is that if you stocked out twice in a month, raise the cushion; if the item sits unsold for months, lower it.

Finally, write the reorder rule down next to the item or in your product notes: reorder at 18, order 40. Staff can then act without asking you. A rule that lives only in the owner's head is a bottleneck every time the owner is away, and shortages tend to happen exactly then.

If your catalogue has unusual rules, say bundled items or different suppliers per branch, and you want billing and stock set up around them, tell us on the contact page. Otherwise start small: ten items, honest lead times, one morning check. It's enough to stop most of the 'tomorrow' conversations.