What a reorder level is
A reorder level (or low-stock level) is the quantity at which you buy more. When a product drops to it, it goes on the shopping list. Set it high enough that the new stock arrives before the old runs out.
The simple formula
Reorder level = what you sell in a day × days until a new delivery arrives + a safety margin.
Example: you sell about 6 cartons of noodles a day. When you order, the supplier delivers in 3 days. 6 × 3 = 18 cartons will sell while you wait. Add a margin for a busy day, say 2 days' worth (12 cartons). Reorder level: 30 cartons.
Working out what you sell in a day
Take a normal month's sales of the product from your records and divide by the days you were open. If your records aren't reliable yet, use a week you watched closely. Don't use a festive season; set a separate, higher level for December.
How big a safety margin?
- Reliable supplier, steady sales: one day's worth.
- Supplier sometimes late, or sales jump on market days: two or three days' worth.
- Products you must never run out of (the one people come for): be generous. Running out costs more than holding extra.
Not everything needs one
Set levels for your fast movers and your essentials first, perhaps 20 to 50 products. Slow items you buy once a quarter can be checked at your regular count.
Make it a habit
A reorder level only helps if someone looks. Check the low list every morning before you call suppliers, and review the levels every few months as your sales change.