Setting Your Reorder Point & Quantity in a Time of Uncertainty

When eCommerce has been around long enough to have an age-old question, I predict it will have to do with supply chain management. And perhaps no other people in history have grappled with supply chain issues as we have over the last 5 years.

While reorder points and reorder quantities can sound like a trivial part of business, they are actually the end result of figuring out your supply chain. The reorder point is the amount of inventory you have left when you reorder. The reorder quantity is the amount you reorder.

Let’s start by looking at how to calculate your reorder point and reorder quantity.

As the infographics indicate, it is important to note that large businesses often use lead time instead of time between orders. I recommend Time Between Orders because small businesses usually consider more factors than just lead time in determining their time between orders. For example, small businesses might have a minimum order quantity that forces them to order a 4-month supply even if the lead time is only two months. Conversely, another business may not have enough cash to order enough products to cover the whole lead time all at once. If the lead time is 2 months, they might have to place an order once a month to ensure safe cash flow.

Tariffs and Uncertainty

Much like the COVID era, tariffs have created a deep sense of uncertainty for small eCommerce businesses. How do we determine the lead time when some cargo shipments are being canceled? How do we assess sales projections when we have to raise prices? Should we order in these 90-day pauses?

There are no easy answers, and I certainly and not the type to predict the future, but here are the items that I would be taking into account:

• Emergency Cash Preservation: An emergency fund or credit line is essential in a time of uncertainty.

• Avoid Sales Protection Reliance: I love projections. Budgeting and projecting were my favorite parts of business school, but projections are only as good as the data you put in, and at the moment, it is hard to rely on! This is probably not the time for optimistic sales projections.

• Build Stock During Tariff Pauses: The big companies anticipated these tariffs and preordered. Of course, that is easy for them to do! If you're confident in your sales, the time to build stock is during tariff pauses.

• Pay Attention and Take Breaks: The stress of day-to-day changes that deeply impact your business can be immense. We’re feeling it at Key Fulfillment! It’s important to pay attention, but it is also important to take breaks. As Mark Blake said, “Sometimes the most productive thing you can do is relax.”

• Reassess, Reassess, & Reassess: The business environment is changing by the day. The time for setting your reorder point and reorder quantity, and leaving it is gone!

Starting a small Shopify business can be such a lonely pursuit! Sometimes I think it would be great if there was just a committee that could handle a few of the decisions that need to be made! If you need a team to help you with your outsourced customer service, order fulfillment, or kitting, we are here to help! Give us a call today at 720-486-2101.