What is Reorder Level?
A reorder level is the stock quantity at which a new order should be placed, so stock arrives before the shelf runs empty.
Updated
Meaning
English
A reorder level is the stock quantity at which a new order should be placed, so stock arrives before the shelf runs empty.
Roman Urdu
Reorder level stock ki woh had hai jis par naya order dena chahiye, taake shelf khali hone se pehle maal aa jaye.
Also called reorder point, minimum stock, low stock alert, safety stock.
Example
A shop sells about 6 bottles of a shampoo a day and the distributor delivers 4 days after ordering. Keeping 2 days of safety stock, the reorder level is 6 times 6, which is 36 bottles.
How it works
The simple formula is daily sales multiplied by supplier lead time, plus safety stock for busy days and late deliveries. Setting it by gut feel leads to two costly outcomes: running out of fast sellers (lost sales that never show on any report) or overstocking slow ones (cash stuck on the shelf).
Reorder levels should change with the season. Sales of cold drinks, school stationery and Ramadan items swing sharply, so a level based on the last 30 days of sales is better than a fixed number set once. Group the reorder list by supplier, since one order goes to one distributor.
In Nafaa
Each product in Nafaa can have its own low stock limit. The low stock page also works out how many days each item lasts at its recent selling rate, flags what runs out soon, estimates lost sales on items already out, and suggests a quantity to order for the chosen number of days.
Related terms
- Purchase Order (PO)
A purchase order is a document a buyer sends a supplier listing the items, quantities and agreed prices it wants to buy.
- Dead Stock
Dead stock is inventory that has not sold for a long time and is unlikely to sell at its normal price.
- ABC Analysis
ABC analysis sorts products into three groups by their share of sales or profit: A for the few that bring most of it, B for the middle, and C for the many that bring little.
- Inventory Turnover
Inventory turnover is how many times a business sells through its average stock in a period, calculated as cost of goods sold divided by average stock at cost.