Zoho Inventory Reorder Points
Get Notified when Inventory is Low
In a business, you can’t afford to run out of stock or hold too many items in your inventory. You need to maintain an equilibrium between ordering items at the right time and keeping the right number of items as buffer stock. This can be done with reorder points.
What is a reorder point?
A reorder point is a threshold that helps you maintain the right inventory level. It helps you to keep tabs on the inventory level of your items so that you do not run out of stock. Whenever the item count reaches the reorder point, you get automatically notified and you know it is the right time to create a purchase order with your supplier.
Components of a Reorder Point
The lead time and variability in demand together make up a major part of the reorder point formula. Once these two variables are calculated, you will get the amount of items you need to maintain as safety stock. When the safety stock number is added to the average demand, you have your reorder point.
Safety stock is like an extra cushion for your business. It adds some comfort by keeping you safe from fluctuations in your sales numbers. Safety stock ensures you have enough on hand to avoid such a situation. It covers the risk of unexpected delays and cuts down the chances of going out of stock.
Calculating your safety stock is a crucial part of finding your reorder point. It incorporates the fluctuations in supply and demand, which gives a more reliable reorder point. In the following section, we have explained each variable of the reorder point formula and how it’s calculated, with special emphasis on safety stock.