Minimum stock: when to reorder

One of the worst moments for a shopkeeper: a customer asks for your best-selling item and the shelf is empty. You order now, but the goods arrive in three days, and the customer goes to another shop in the meantime. The fix is simple and is called a "minimum stock level": for each important item you set a number, and when stock falls to it, it is time to place a new order while the item has not yet run out.

What minimum stock is

Minimum stock (the reorder point) is the threshold at which, when this much remains on the shelf and in the storeroom, you must order from the supplier. The idea is that sales continue between placing the order and the goods arriving. So part of the stock has to be held back in advance to cover the delivery time.

The calculation formula is: minimum stock = average daily sales × delivery time (in days) + safety stock.

Safety stock is for the unexpected: sales may jump or the supplier may be late. It is usually set at one to three days of sales.

A worked example

Item: sunflower oil (1 litre).

• On average 6 units sell per day.
• Delivery from the wholesale base takes 4 days.
• Safety stock: 2 days of sales.

Calculate: 6 × 4 + 6 × 2 = 24 + 12 = 36 units. So when stock falls to 36 units, place a new order. If 36 is the total on the shelf and in the storeroom, then before the order arrives you will sell 24 units, and the remaining 12 stay in place as your safety stock.

Where to get the numbers

Daily sales. Add up sales for the last 30 days and divide by 30. If the item often ran out, exclude the days when it was unavailable: otherwise sales will look lower than they really are.

Delivery time. Record not what the supplier promises but how many days actually passed: the day you ordered and the day the goods arrived. From a wholesale base in Tashkent the goods may arrive in a day, while from a region or from abroad they take several days or weeks. If delays are frequent, raise the safety stock.

Automating it in Excel

Add a "Minimum stock" column to your table and a status column next to it. For example: =IF(C2<=D2,"Order",""). Here C is the current stock and D is the minimum. As soon as stock reaches the threshold, the row flags itself, and colour highlighting (conditional formatting) makes it even more visible. Each morning, look at the rows marked "Order" and send the order to the supplier.

One more column is useful: "Date ordered". It shows goods that have been ordered but have not yet arrived, and protects you from ordering twice. When the goods arrive, clear the date and record the receipt.

Minimum stock answers "when", while "how much" needs a separate decision. A simple rule: order enough to cover two to four weeks of sales. Take more of fast-selling goods that are easy to store and less of slow or perishable ones. For example, for oil that sells 6 a day, a two-week order is 6 × 14 = 84 units, and you place it as soon as stock reaches the minimum. And remember that over-ordering is a loss too, because it freezes money.

The most common mistakes

• The minimum stock is set once and not changed for years, though sales have grown or the season has changed.
• Delivery time is taken from the supplier's promise, while in reality it is longer.
• Nobody notes that an order has been placed, and the same item is ordered again while it is already on its way.
• The stock figure in the table is wrong, so the signal fires late.

Conclusion

Minimum stock is a simple signal that warns you before an item runs out. For it to work, the stock in your table must match the real stock. If the table and the shelf disagree, AniqHisob can run a stock count and establish the true balances, after which setting minimum levels becomes reliable.