Reorder points: how to set them without getting it wrong
The reorder point (or alert threshold) is the quantity below which you need to order more. Simple on paper, but easy to get wrong in practice — set it too low and you discover the stockout too late; set it too high and you tie up cash and storage space for nothing.
The hidden cost of a bad threshold
A stockout doesn't just cost the lost sale: it often forces an urgent order, sometimes at a worse price or from a backup supplier. On the other hand, a threshold set too high freezes cash in products sitting on a shelf, with an added risk of expiry or obsolescence depending on the sector.
The right setting sits between the two: early enough to reorder calmly, late enough to avoid overstocking out of excessive caution.
What should actually go into the calculation
Three things really matter: the supplier's actual lead time (not the advertised one, the observed one), how fast the product actually moves (a fast-moving product deserves a more cautious threshold than a slow one), and a safety margin to absorb the unexpected — a delayed delivery, a demand spike.
A reasonable threshold covers at least the consumption expected during the lead time, plus that safety margin. Below that, the risk of running out before the next order arrives increases noticeably.
A threshold is never set in stone
The threshold that made sense when a product launched won't necessarily still make sense six months later: a supplier change, seasonality, or shifting demand can make it obsolete. The habit worth building: review thresholds after any notable change, not only after a stockout has already happened.
Frequently asked questions
?Should every product have the same threshold?+
No. A fast-moving product with a slow supplier deserves a higher threshold than a slow-moving product with quick restocking.
?How does Fluxalyo actually use this threshold?+
Every product has its own alert threshold. As soon as stock drops below it, a notification goes out before the stockout, not after — enough time to reorder calmly.
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