Order on a number instead of on instinct
Turns how much you sell, how long your supplier takes, and how variable that time is into a reorder point you can put in your ordering sheet today.
What it does
- Writes out the reorder point and safety stock formulas in full, with the z value for 90, 95 and 98 percent service so you can choose what you are willing to fund.
- Gives you a one page worksheet per SKU that forces you through average daily units, lead time, safety stock and the final trigger in that order.
- Ships a supplier lead time log that turns "about two weeks" into a typical lead time, a longest seen figure and a standard deviation, with the sample standard deviation calculation written out.
- Includes three sanity checks, including the one that catches a safety stock that is smaller than the worst lead time you have actually lived through.
Resource Teaser Preview
reorder point = (average daily units sold x supplier lead time in days) + safety stock
safety stock = z x (average daily units sold x lead time standard deviation in days)To unlock the full kit, complete prompt set, and automated workflow, request access below.
What you need
- Twelve months of unit sales per SKU, or at least one full buying cycle of it.
- Order history with placed and received dates, so the lead time log is measured rather than guessed.
- Nothing to install. Four markdown files and a spreadsheet.
Setup
- Open supplier-lead-time-log.md and fill in the observation table from your real orders, ten to twenty per supplier before you trust the standard deviation.
- Open reorder-point-worksheet.md and work step 1 for one SKU: average daily units sold, in units, over a window that excludes sales and stockouts.
- Pick your service level in step 3, work the safety stock, then add it to lead time demand to get the reorder point in step 4.
- Run the three sanity checks in step 5. If the longest observed lead time is not covered, step up the service level and recalculate.
- Write the trigger into the spreadsheet you actually order from, then re-check it after 90 days against what actually happened.
On a real store
A fictional homeware brand with a lamp that sells 3 units a day on an 18 day lead time with a 4.2 day standard deviation calculates a 75 unit reorder point at 95 percent service, then finds the sanity check fails against a 31 day lead time they actually hit in January, and settles at 80 units after switching to 98 percent. Made-up numbers, shown only so the arithmetic is visible.
Frequently Asked Questions
What service level should I pick?
We suggest 95 percent as a starting point to check against your own data, not as a rule. A cheap product you cannot afford to be missing justifies a higher level than an expensive slow mover, and your cash position decides more than any table does.
Does this tell me how many units to order?
No. It gives you the trigger point only. How much to put on the order is a separate decision about how long you want to hold stock and how much cash you have.
What if my supplier lead time is all over the place?
Then the average in the formula is not describing your real risk, and no z value fixes that. Log the variability, raise the longest seen figure with the supplier, and expect to hold more cover until it settles.
Want this done for you instead?
We run the whole audit for you: a scored read of your store, what's costing you sales this week, and what to fix first. $500, most stores get it back in the first fix.
Get the $500 audit