You have acquired the inventory you need to keep your business going, based on your predicted rate of sales of a product. You are content with that prediction’s accuracy, and have put off restocking the product for later without a reminder.
But an unpredicted event occurs and depletes that stock. Or, you forget to restock in time and experience loss of sales and brand value. This happens because you failed to notice the right point in time to restock the product.
But how to determine that point with so many variables?
This is where the Inventory Reorder Point report comes in. The data in this report helps calculate the levels at which you have to restock your inventory to not disrupt the flow of products from your and your vendor’s end.
Understanding the Inventory Reorder Point Report
At first glance, this report may seem complicated with its formulas and calculations. We can assure you it’s anything but that, as you’ll see going forward. We’ll start by exploring the information this report provides, and how to utilize it effectively.
Common Fields Used in the Inventory Reorder Point Report
Product Title – Name of the product.
Variant Title – The product variant title.
SKU – Unique identifier for the product in the store
Days to Replenish – Number of days left for reordering.
Replenishment date – Date when reordering should occur.
Inventory Quantity – The number of items in stock for the product category.
Lead Days – The period between ordering and receiving inventory.
Total Unit Sold – Total units of products sold during the period.
Safety Stock – Additional inventory kept to prevent out-of-stock situations.
Reorder Point – Inventory quantity indicating when a product requires replenishment
Here’s how the various crucial data fields of the report are calculated:
- Lead days = Time lapsed between placing and receiving the order. Unit – Days
Knowing a stock’s lead time is crucial for maintaining a product’s safety stock quantity and fixing its reorder point. Note that a product’s lead time can vary depending on its supplier and the specific variants on offer. To ensure accurate calculations of your Reorder Point, we recommend narrowing the lead days to the correct number of days.
You can manually adjust the lead time in the report, allowing you to input the estimated time to replenish stocks. This step is essential for fine-tuning your inventory management strategies.
- Safety stock = (total units sold / range) * lead days
Safety stock is a buffer in your inventory that ensures you’re prepared for unexpected demand for a product. It guards against delays in getting your products to meet sudden surges in demand.
When figuring out your safety stock quantity, it’s necessary to use your current inventory data. The primary factor in this calculation is the total units sold during a given date range.
To determine safety stock, look to your past. Focus on the times your online store saw significant growth or hit major milestones and study those trends. It’ll help you estimate a more accurate safety stock number.
- Reorder point ROP (Reorder Point) = (Daily Demand * Lead Days) + Safety Stock
The Reorder Point (ROP) is based on your safety stock, lead days, and daily demand. If both the safety stock and the ROP show “0”, it means there’s currently no demand for that product. In this situation, there’s no immediate need for you to reorder.
The reorder point takes into account your current inventory, the desired safety stock, and the amount of stock you’ll need during the lead time.
- Days to Replenish = Inventory quantity / Total units sold * Day difference + 1
- Replenishment Date = Current Date + Days to Replenish
Why Your Shopify Store Needs This Report
The ROP (Reorder Point) field is especially significant. It displays the product quantity till you can continue with present stock. Once the product’s stock goes below this point, you should reorder. As you can see, this report at its core is a simple one. Once you dig deeper and absorb the insights it offers, you’ll be well-equipped to proactively manage your inventory, ensuring uninterrupted product flows. Utilizing a reorder point report for your Shopify business simplifies comparing your current inventory quantity with the ROP quantity.
You needn’t manually work out the quantity at which a product needs restocking, constantly adjusting the value according to changing circumstances and repeatedly check a marked calendar for this restock point. Instead, this report lets you directly go ahead with replenishing the sold-out products, including their safety stock, and determine collectively the product quantities to be ordered.
Unquestionable certainty about future inventory requirements is impossible, despite diligent forecasting efforts. However, you can come close to understanding future demand for your goods with the Inventory Reorder Point report. For this, it is necessary to determine the Reorder point for each product individually. This point depends on an item’s accurate Lead days and Safety stock data, both of which need to be identified to calculate this point.
Here’s an example:
Let’s say you run a soap store. Typically, you keep a safety stock of 5 boxes, it takes 20 days for new stock to arrive at your warehouse, and you sell 20 boxes every 20 days. So, when your inventory drops to 25 boxes, it’s time for you to reorder 20 boxes.
However, if there’s a surprise sale of 3 boxes, then you’d want to order 23 boxes to cover that sale and restore your safety stock.
To get a consistent and accurate reorder point in your reports, you must filter the report to show products having the same Lead days. Here are the formulas used to determine the Replenishment Date and Days to Replenish.
Replenishment date is when you need to place an order for refilling your inventory to ensure a continuous supply of goods. Additionally, these calculations show how many days are left until replenishment. This crucial insight gives you a clear timeline to create a successful inventory replenishment process.
Commonly Asked Questions Answered by This Report
How do you calculate reorder inventory?
What is the reorder point formula?
What is the inventory reorder level?
What is the formula for stock reorder point?
What is the formula for safety stock inventory?
How to identify the safety stocks?
I want different safety stock for different items. How is this possible?
How much stock should I buy for the next 3 months of sale, given historical data?
How do I set the safety stock or ROP (Reorder Point) for each inventory item?
What do you mean by Lead Days here, and is it editable?
I need to set the reorder quantity points for my goods. How to do it?
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