Best Practices: Leveraging Reorder Points to Maintain Stock Levels
It doesn’t matter if you’re a small start-up e-commerce business or a multi-warehouse giant, leveraging reorder points to maintain stock levels will have a positive effect on your day-to-day operations and help ensure that you capture every sale you can.
Even before my previous e-commerce business was mature enough to justify an inventory management software solution, I still relied on reorder points in spreadsheets to help me maintain stock levels. Believe me when I say every seller can benefit from using some sort of a reorder point to evaluate stock levels.
Your reorder point is the level of inventory you choose to indicate it’s time to order new stock. You can determine your reorder point in several different ways.
Sales Velocity
The most basic way to figure out a reorder point is to just look at your order history for any given product. If you sell 30 items in 30 days, and your ideal stock level is 30 days, then you should stock 30 of that product. This is referred to as your sales velocity. Figuring out how much inventory you move in a given time is a great way to decide how much to order on your next purchase.
It’s more of a business decision to determine what sort of back stock you want to keep. Some companies prefer shorter shelf life and more frequent replenishment orders, so 14 days would be more desirable. Other companies might order overseas or have a long replenishment cycle, so for those companies, a much larger back stock would be ideal. Here is the basic formula to calculate your sales velocity:
Reorder Points
Of course, sales velocity might not be right for everyone. Another common method of leveraging reorder points would be to set thresholds. Using sales velocity is just one way of figuring out what your threshold should be. Other common ways may be to set reorder points based on anticipated volume, purchase discount levels and any other number of ways that work best for your company.
If you choose to create your own reorder point formulas, refer to historical and current data, including your consumption rate, lead time and safety stock level for each product. For an even more effective model, factor in additional data like business growth, manufacturer changes and product quality variance.
No matter how you feel is the best way to calculate your reorder points, they can all be leveraged to the same effect.
Let’s say you never want to dip below 100 units on hand at any given time because it may take two months to receive more, and you don’t want to risk selling out. That would be your reorder point. When you get below 100, you order more. This may be the most basic way to set reorder points to help maintain your stock levels.
Maximum Reorder Points
Maximum reorder points, also called upper thresholds or desired stock levels, are particularly useful when using reorder points.
Setting the reorder point, or threshold at which you need to place an order, is only half of the battle. It is ideal to also set up a point to which you should reorder TO. For example, you may have an ideal stock level of 100 but don’t want to place an order for 1 if you dip to 99. You may, instead, want to reorder 75 once your stock level reaches 25. This would be a perfect example of reorder points being fully maximized. The reorder point is 25, but your reorder maximum would be 100.
Many software providers can do this for you, but it can also be done on a spreadsheet. You would just need to do a conditional statement:
Benefits of Setting Reorder Points
Setting a reorder point is one of the most effective ways to manage your inventory. Reorder point formulas help you to:
- Prevent stockouts: The most obvious advantage to calculating your reorder point is that it keeps you from regularly running out of stock.
- Provide better customer experience: With a lower chance of stockouts occurring, there’s a higher chance that customers will be satisfied with their orders. More satisfied customers mean more business for you.
- Reduce the risk of overstocking: The chance that you’ll order too much stock or restock too frequently is significantly lower since you have a solid idea of when you need more.
- Forecast more effectively: You can more accurately predict how long it will take you to run out of stock, and as long as you track how much you have, you can avoid accidental stockouts.
Remember that your reorder point can change based on external causes. Reevaluate your formula or sales velocity regularly to keep up with market trends and supply chain incidents.
The Importance of Safety Stock
Your safety stock is your emergency stock. If anything unexpected happens, whether that’s severe weather affecting your supply chain or a sudden spike in demand for a certain product, setting aside a specific number of units in addition to your ideal stock level can prevent most stockouts.
For example, let’s say you’re an online shoe retailer. Demand for one style of men’s loafers suddenly skyrockets, and these loafers are flying off warehouse shelves like never before. You quickly burn through your regular stock and have to wait a week for a new shipment to arrive. That’s where your safety stock comes in. It’ll allow you to keep selling the product for at least a portion of the time it will take you to replenish them without needing to resort to backorders.
Your daily stock consumption and average replenishment time are the two main factors you will need to calculate your ideal safety stock number. How much stock do you normally go through in a certain amount of time and how long does the restock process take? That number is how much safety stock you should keep.
For clarification, your safety stock number is different from your reorder point. Your safety stock is an addition to your regular stock. Your reorder point is the point at which you need to replenish your inventory.
Summary
In short, if you aren’t using reorder points to some degree, you should. Maintaining stock levels to cover future sales is extremely important for businesses to capitalize an items full sales potential.
Always remember: a healthy business has a healthy stock level.
What is the first thing I should fix if I want to scale operations?
Start with a unified view of inventory. The core of maturity starts with being able to accurately represent what you do have and make sure that you know where it’s located to get it to customers quickly. Without a unified view across your warehouses, 3PLs, and vendors, you cannot make the best decisions because you don’t have the best information at hand.
With Inventory Visibility, Businesses Can Make Smarter Allocation Decisions
Once inventory is centralized, businesses can move from reactive updates to intentional allocation. They can decide how much inventory to expose to each channel, when to use buffers, which marketplaces need extra protection, and how seasonality or campaign performance influence availability.
Once I know what inventory I have, how should I decide where to make it available?
Inventory allocation should reflect where orders are coming from, where marketing is working, and which channels carry the most risk. Once you know what you have and where it is located, you can think more strategically using centralized inventory to make prioritization happen automatically. One fertilizer company lost a little over 5,000 orders in one weekend because someone manually uploaded the wrong available inventory to Amazon.
Better Inventory Data Improves Planning, Purchasing, and Growth Bets
Better visibility turns inventory data into a planning tool. With insight into sales velocity, inventory levels, vendors, and channel performance, businesses can make more informed replenishment decisions, avoid overbuying, and test new product lines or vendor-supplied inventory without taking on unnecessary risk.
How does better inventory data help me make smarter buying decisions?
It lets you measure whether your plan is working before you commit more capital. A key question becomes: “Did my plan work? Am I overleveraged in one place or another?” Centralized systems can also help businesses test new product lines or vendor relationships by looking at sales velocity by channel, allowing them to take risks in a calculated and measured way.
Intelligent Order Routing Turns Inventory Complexity Into Automation
Once inventory and supplier data are reliable, businesses can automate fulfillment decisions. Orders can be routed based on cost, speed, margin, location, warehouse priority, vendor fallback, split-shipment rules, or customer expectations. This helps hybrid fulfillment scale because every order does not need a manual review.
How do I decide the best way to fulfill each order?
There is no single answer, which is why order routing needs to account for the context of each order. Intelligent order routing is not just sending an order to someone who has stock; it is taking each and every order and treating it like its own unique use case. Depending on the order, the business may prioritize speed, margin, an internal warehouse, vendor fallback, or preventing split shipments.
Supplier Inventory Sync Extends Inventory Beyond the Four Walls
For hybrid fulfillment to work, supplier inventory needs to become part of the operating model. Supplier sync does not always require advanced technology; it can happen through automated files, FTP, email, APIs, EDI, or ecommerce storefront integrations. The key is replacing manual updates with automated, reliable supplier data.
Can supplier inventory really be treated like part of my own inventory?
Yes, but the goal is not necessarily to force every supplier into a complex integration. Real-time supplier sync can be defined as any way to get an automated update from a supplier, such as Google Sheets, email, FTP, API, EDI, or ecommerce storefront connections. The key is that accurate supplier stock is foundational. If you don’t have an accurate view of what is in stock with your suppliers, you cannot tell your sales channel accurately what’s available.
Exception-Based Workflows Keep Humans Focused Where They Matter
Automation does not remove people from the process. Mature operations let technology handle the routine majority while humans focus on exceptions, such as high-value orders, fraud risk, compliance requirements, restricted products, export rules, or unusual fulfillment scenarios.
If my business has special cases, can automation still work?
Yes. The point is not to automate every possible decision; it is to automate the routine work and surface the exceptions. Businesses should not have to look at every single order. Instead, technology can highlight high-value orders, risky locations, or compliance requirements. The goal is to take care of the 80% of workflows that are obvious while still allowing human review when specific exceptions arise.
The Right Inventory Technology Should Fit the Business, Not Overwhelm It
Software decisions should be based on business fit, not popularity, feature volume, or broad “all-in-one” promises. Growing ecommerce businesses should identify their highest-impact bottleneck, prioritize what matters now, and choose technology that is right-sized but flexible enough to support future phases of growth.
How should I choose software without overbuying or picking the wrong system?
Start with your priorities, not the biggest feature list. Avoid an all-in-one system that claims to “do everything under the sun” and look for a “best of breed approach” with systems that can scale as you add channels or vendors. The practical advice is to stack rank what matters now, make sure the system can support future phases, and choose technology that fits your business rather than overwhelming it.
How to Scale Ecommerce Operations Beyond Spreadsheets
For many growing ecommerce businesses, Finale and Flxpoint work together as a practical answer to these challenges. Finale helps centralize and manage internal inventory, purchasing, warehouse operations, and stock visibility, while Flxpoint helps connect vendor inventory, automate supplier sync, and route orders across hybrid fulfillment networks. Together, they give businesses a best-of-breed way to improve inventory accuracy, reduce spreadsheet work, and scale fulfillment without forcing every process into a one-size-fits-all system.
Ecommerce Fulfillment Operations FAQ
What Is Ecommerce Fulfillment Operations?
Ecommerce fulfillment operations are the processes that move an online order from purchase to delivery. This includes managing inventory, syncing product availability across channels, routing orders to the right warehouse, 3PL, supplier, or vendor, and making sure the customer receives the right product on time. As discussed in the webinar, fulfillment is no longer limited to “what’s in my warehouse these days”; growing businesses may rely on internal warehouses, 3PLs, marketplace fulfillment services, and supplier inventory at the same time.
What Are Ecommerce Fulfillment Operation Examples?
Examples of ecommerce fulfillment operations include updating inventory across Shopify, Amazon, Walmart, and other sales channels; allocating inventory to specific marketplaces; sending orders to an internal warehouse, 3PL, or vendor; syncing supplier inventory through files, APIs, EDI, email, or FTP; replenishing warehouse stock based on sales velocity; and flagging exceptions such as high-value orders, compliance requirements, or restricted products. In the webinar, the speakers also discussed hybrid fulfillment examples where a business may fulfill some products from its own warehouse and use vendors as a fallback or extension of available inventory.
How Can I Track My Inventory at an Ecommerce Fulfillment Center?
The best way to track inventory at an ecommerce fulfillment center is to create a unified inventory view that shows what is available, where it is located, and how that inventory connects to each sales channel. That means tracking inventory across internal warehouses, fulfillment centers, 3PLs, marketplace fulfillment programs, and supplier locations instead of relying on disconnected spreadsheets. The webinar emphasized that businesses need to “accurately represent” what they have and know where it is located so they can get products to customers quickly.
How Can I Connect My Inventory to My Supplier?
You can connect supplier inventory through several methods, depending on what the supplier supports. The webinar discussed low-tech and advanced options, including automated Excel or CSV files, Google Sheets, email updates, FTP servers, APIs, EDI, and direct connections to ecommerce storefronts such as Shopify, BigCommerce, or Magento. The key is to ask suppliers how they share inventory today, then use a system that can automate that data flow instead of manually copying supplier inventory into spreadsheets.
What Is Ecommerce Order Routing?
Ecommerce order routing is the process of deciding where an order is fulfilled from after a customer buys. In a simple operation, every order may go to one warehouse. In a more complex or hybrid fulfillment model, the best fulfillment source may depend on inventory availability, shipping speed, cost, margin, customer location, warehouse priority, vendor fallback rules, or whether the order should be split. The webinar described intelligent order routing as treating each order like its own use case, so businesses can automate the best fulfillment decision without manually reviewing every order.
