SMB Tools / Inventory Reorder & EOQ
Never run out, never overstock
Two numbers keep product businesses honest: the stock level to reorder at so you don't run dry while you wait on the supplier, and the order size that keeps ordering and holding costs in balance.
What this means
- What moves it
- Nothing to change on the buffer. Write the reorder point on the shelf or in the point of sale, so the order happens when the count hits it, not when someone notices.
- What to check
- Each order costs $75 to place and each unit $5.00 a year to hold; $7,573 sits on the shelf right after a delivery. A supplier that slips to 21 days needs a bigger buffer.
- Where this goes next
- Save it, then put the reorder points into the operating procedures and the point of sale so the count does the ordering. Open →
Worked out from the numbers on this page. A description of the math and an estimate, not advice; what to do is your call, with your adviser.
Demand & lead time
Units sold per month
units
Supplier lead time
days
Safety stock
units
Order economics
Cost to place an order
$
Unit cost
$
Annual carrying cost
%
Reorder when stock hits
190 units
order about 329 units each time · ~11.0 orders a year
Buffer fits5 days of buffer
Your safety stock covers 5 days of sales against a 14-day lead time: enough to ride out a late delivery without hoarding. This policy keeps about $4,286 of cash on the shelf on average, $7,573 right after a delivery.
- Order quantity
- 329 units ($6,580)
- Days between orders
- 33
- Cash on the shelf, average
- $4,286
- Cash on the shelf, right after a delivery
- $7,573
- Cost of this policy per year
- $1,893
- Versus ordering a month at a time
- about the same
Sells ~10.0/day × 14 days lead140 units
Plus safety stock+50 units
Reorder point190 units
Placing 11.0 orders a year$822
Holding 214 units on average+$1,072
Yearly cost of the policy$1,893
A self-assessment estimate that assumes fairly steady demand, not advice. Seasonal or spiky items usually need a larger safety stock; revisit as real numbers come in.