Your Best-Selling Product Was Out of Stock for Nine Days Last Month

Running out of your top seller costs more than the item. Here is the simple arithmetic that tells you when to reorder, before the shelf is empty.

A stockout is the only retail loss that leaves no evidence. Expired goods sit in a bin where you can see them. Dead stock sits on a shelf. A stockout produces nothing at all — just a customer who came in, did not find what they wanted, and left.

Which is why most shops badly underestimate how often it happens to them.

What a Stockout Actually Costs

That last one is the expensive part and the hardest to recover. A customer does not switch shops over one missing item. They switch after three.

The Reorder Point, in One Line

Reorder point = (average daily sales × supplier lead time in days) + safety stock.

A worked example. You sell 12 packets a day. Your supplier takes 4 days. Without any buffer you would reorder at 48 packets — and any delay or busy weekend leaves you empty.

When stock hits 72, you order. Not when it looks low, and not when a customer points out the gap.

Use roughly 50% of lead-time demand for reliable suppliers and steady sellers. Push toward 100% for unreliable suppliers, volatile demand, or anything you cannot afford to be without. Drop toward 25% for slow movers where the holding cost outweighs the stockout risk — safety stock is insurance, and insurance has a price.

Where the Numbers Come From

You do not need a forecasting model. You need two honest figures per product.

The most common error is using the promised lead time instead of the observed one. If a supplier says two days and delivers in five, your reorder point is built on a number that has never been true.

I was ordering when the shelf looked empty. By then it had been empty for two days.

Do This for Twenty Products, Not Two Hundred

In most shops, twenty products account for a large share of both turnover and stockout damage. Set proper reorder points for those. Everything else can run on a simple low-stock alert and a weekly glance.

Trying to calculate reorder points across a full catalogue is how the whole idea gets abandoned in week two.

Arali tracks average daily sales per product and can alert you at a reorder point rather than at zero, so the order goes in while there is still stock on the shelf. Setting this up for your top twenty items is usually an hour's work and removes most stockout losses.

Frequently asked questions

How do I calculate a reorder point for my shop?

Reorder point equals average daily sales multiplied by supplier lead time in days, plus safety stock. Selling 12 units a day with a 4-day lead time gives a base of 48, and adding 50% safety stock gives a reorder point of 72. When stock reaches 72, you order — not when the shelf looks low.

How much safety stock should I hold?

Around 50% of lead-time demand for reliable suppliers and steady sellers. Increase toward 100% for unreliable suppliers, volatile demand, or products you cannot afford to be without. Reduce toward 25% for slow movers, where the cost of holding stock outweighs the stockout risk.

Why do stockouts cost more than the missing sale?

Because the customer usually completes the rest of their shopping elsewhere, so you lose the whole basket rather than one item. Repeated stockouts also erode the "always has it" reputation that is most neighbourhood shops' main advantage over supermarkets. Customers rarely switch after one missing item, but commonly after three.

Should I set reorder points for every product?

No — that is how the practice gets abandoned. Set proper reorder points for the twenty or so products that drive most of your turnover and most of your stockout damage. Everything else can run on a simple low-stock alert and a weekly glance at the shelves.