Everyone knows a stockout loses a sale. What is less visible is that it loses several: the customer who cannot find their oil does not leave without oil, they leave with the oil and the rest of their shopping somewhere else.
That is what makes a stockout dearer than overstock. One case too many sleeps for a few days; a customer who went to the shop down the street may not come back for weeks.
The useful question is not "how much is left"
The reflex is to reorder when the shelf looks empty. The trouble is that "empty" arrives when it is already too late: between your order and the delivery, days pass in which you keep selling.
So the question worth asking is: at what level must I reorder so that I do not hit zero before the supplier arrives? That level has a name — the reorder threshold.
Two numbers are enough
The calculation fits on one line, and the two numbers it needs are ones you already know, or that two weeks of evening readings will give you.
- What you sell per day — the average, not your best day.
- The supplier's lead time — the real time between your call and the goods on the shelf, not the promised one.
The threshold is the two multiplied together, plus a safety margin. An example to fix the idea: if you sell six units a day and the supplier takes four days, you consume twenty-four units while waiting. Reordering at twenty-four means hitting zero exactly on delivery day — so reorder at around thirty-five, to absorb one day of delay and a weekend peak.
Lead time is half the calculation
This is the part everyone underestimates. The lead time that matters is not the one you are told, it is the one you observe: write down the order date and the delivery date on three or four orders, and take the longest rather than the average.
A reliable three-day supplier and an erratic two-to-eight-day supplier do not call for the same threshold, even for the same product at the same sales rate.
A threshold is set against your slowest supplier, not your fastest.
The three usual mistakes
- Setting the threshold on your best month. Ramadan or back-to-school should not set the level for the rest of the year, or you carry dead stock eleven months out of twelve.
- One threshold for the whole shop. A product that moves six times a day and one that moves once a week have no business sitting at the same level.
- Never revisiting it. A threshold set once and never touched goes wrong the moment sales shift. Twice a year is enough.
What automation changes
Setting thresholds by hand works fine for twenty or thirty products — that is in fact where you should start with twenty products. What does not work by hand is watching them: you would have to reread the whole list every evening to spot the three lines that dropped below.
Software can automate stock movements: it knows the quantity left after every sale, compares it to the threshold you set, and shows you the list to order. Gestio does it on the phone at the counter and on the computer in the office — see the features.