Stop running out of your best sellers

There is a particular kind of bad week where the takings look fine and the shop feels wrong. People came in, asked for the thing they always buy, heard “sorry, it is due Thursday”, and left. Nothing about that appears in the sales report. The sale that did not happen leaves no row.

Running out of your best sellers is the most expensive mistake a small shop makes repeatedly, and it is almost always a process problem rather than a money problem. The fix is a reorder point: a number per product that says “order more when stock drops to here”, worked out once and then simply obeyed.

Why “order it when it looks low” fails

Every shop starts by reordering on sight. It works while the shop is small and one person is always on the floor.

It breaks for reasons that have nothing to do with attention. Stock looks low at different points depending on how it is displayed: forty small boxes look like plenty and four large ones look like nothing. It breaks when the person who knows is on holiday. It breaks worst of all when a line is selling faster than usual, which is exactly when you least want to be out of it, because the shelf empties between two visits to that aisle.

A reorder point does not depend on anyone noticing.

The calculation

You need three numbers per product, and none of them need to be exact.

Daily sales. Take a normal month, divide units sold by days open. Two a day, six a week, whatever it is.

Lead time. The number of days between placing the order and being able to sell the goods. Count from when you actually place it, not when you meant to, and include the day it sits in the back before anyone puts it out.

Safety stock. What you keep as a cushion for a busy week or a late delivery. A reasonable starting point is half the lead time’s worth of sales.

Then:

reorder point = (daily sales x lead time) + safety stock

A line selling 3 a day with a 7 day lead time needs 21 units to cover the wait, plus a cushion of around 10, so the reorder point is roughly 31. When stock hits 31, you order. Not when the shelf looks sad.

How much to order

The reorder point tells you when. The order quantity tells you how much, and the two are separate decisions.

Order enough to cover the period until you would sensibly order again, plus the lead time, without tying up more cash than the line deserves. For most small shops that lands somewhere between three and six weeks of sales for a steady product.

Two things push the quantity up: a supplier minimum you cannot avoid, and a genuine price break that beats the cost of holding the extra. Two things push it down: anything perishable, and anything seasonal that will be worthless in eight weeks.

Be honest about price breaks. Buying three months of stock to save 4 percent is a good deal only if you would otherwise have had that cash doing nothing, and in a small shop the cash is never doing nothing.

The lines that deserve this treatment

Do not do this for the whole catalogue. It is a waste of an afternoon and it will not survive contact with a busy week.

Rank your products by units sold and take the top twenty. In most shops those twenty are a large share of the volume, and they are also the lines a customer will walk out over. Set reorder points for those, and let everything else be reordered on sight as before.

Add a line to the list when it climbs into the top twenty, and drop one when it falls out. Twice a year is often enough to review.

Seasonality breaks the average, on purpose

A reorder point built on a twelve month average is wrong in both directions for anything seasonal. It sits too high through the quiet months, tying up cash, and far too low in the weeks that actually matter.

For seasonal lines, work the numbers from the same season last year rather than from the year as a whole, and raise the point ahead of the season rather than during it. If a line triples in December, its December reorder point is roughly triple, and it needs to be in place in November.

If you do not have last year’s figures for the shop, this is the argument for keeping sales history that goes back further than a few months. It is also the reason a POS with a short retention window on the free plan is worth checking before you commit, which is one of the limits worth asking about up front.

The count has to be right

All of this assumes the stock figure in the system matches the shelf. If the number is wrong, the reorder point fires late, or never.

That is the unglamorous half of the job. A rolling stock take keeps the figures honest without closing the doors, and the top twenty lines are exactly the ones to count most often. Counting your fastest movers monthly and everything else twice a year is a reasonable rhythm for a small shop.

Making it automatic

None of this is difficult arithmetic. The difficulty is remembering to check thirty numbers on a Tuesday when three people are waiting at the counter.

That is what the software is for. StoreWave holds a reorder level on every product, lists what has dropped to or below it on the dashboard, and can notify you when a line crosses. Purchase orders live in the same place, so the decision in front of you is “yes, order this”, rather than “what were we selling three a day of?”.