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Inventory reorder points that actually work

July 2026 · 6 min read

Ask a small business where its cash is and a surprising amount of it is sitting on a shelf. Some of that stock is working - it turns over, it sells, it earns its space. Some of it ran out last Tuesday and cost you a job. And some of it has not moved since a hopeful order eighteen months ago and never will. The trouble is that a plain stock list treats all three the same: a quantity in a cell, saying nothing.

A reorder point is the small piece of arithmetic that makes the list start talking. Get it right and the spreadsheet tells you what to buy, what it is worth, and what to stop carrying - which for most small operations is all the inventory intelligence you actually need.

What a reorder point really is

A reorder point is the on-hand quantity at which you should place your next order - low enough that you are not tying up cash in stock you do not need yet, high enough that you do not run dry before the replacement lands. The honest version accounts for two things: how fast the item sells, and how long the supplier takes to deliver.

The rule of thumb: reorder point equals average demand during the lead time, plus a buffer for the weeks that run hot. If you sell roughly ten a week and the supplier takes two weeks, you will burn twenty units before new stock arrives - so a reorder point of twenty just breaks even, and something like twenty-five to thirty gives you cover for a busy fortnight. Set it below your true lead-time demand and you will stock out on the popular lines, which are precisely the ones you cannot afford to lose.

The status should be a formula, not a memory test

The failure mode of every hand-kept stock sheet is the same: it only works while someone is watching it, and nobody watches it forever. The fix is to make the sheet read on-hand against the reorder point automatically and label each line for you - REORDER when you are at or below the trigger, Low when you are getting close, OK otherwise. Now the sheet does the noticing. You are not scanning columns hoping to catch a number before it hits zero; the line raises its own hand.

Roll those statuses up and you get a live reorder queue - every SKU that needs buying, ordered by how short you are - which is the single most useful screen in the whole file. It turns "I should probably check stock" into a purchase order you can act on in five minutes.

Value the stock while you are at it

Every line you already have the numbers for can value itself: on-hand times unit cost. Roll that up across the list and split it by category and you have the figure your accounts want at year end and the figure you want all year - how much cash is committed, and where it is concentrated. It is the same data you entered for reordering, put to a second use for free.

Find the dead stock

The quietest cost in a small business is stock that has stopped moving. It does not stock out, it does not trigger anything, it just sits - and every unit of it is cash you could have spent on the lines that sell. Set a threshold in days for how long is too long, and let any line that has not moved beyond it flag itself as dead stock. Once a quarter you clear the flags: discount it, return it, use it, or write it off - but decide, instead of paying rent on a decision you never made.

When a spreadsheet beats a system

Inventory software is genuinely worth it past a certain scale - hundreds of SKUs, multiple locations, barcode scanning, live integration with your till. Below that, a dedicated system is often a monthly fee and a login for a job a good workbook does faster. If you can list your SKUs on one screen, a spreadsheet that calculates its own status, value and dead stock gives you the three answers that matter with no subscription and no learning curve.

• Enter cost, supplier and lead time once. The status, valuation and dead-stock flag all run off data you already hold.
• Log goods-in and issues as you go. A movements record keeps the quantities honest - the reorder maths is only as good as the on-hand figure.
• Review the reorder queue on a fixed day. Order against the queue, not against a vague sense that things are getting low.
• Clear the dead-stock flags every quarter. The flag is the prompt; the decision to free the cash is yours.

A good stock sheet does three jobs a list cannot: it tells you what to buy before you run out, what your stock is worth, and what has quietly stopped earning its shelf.

None of this needs new software. It needs the reorder point set honestly and a sheet built to do the watching - so the stock works for you, instead of you working the stock.