Reordering

Which SKU to reorder first is a sort, not a meeting

Every SKU already carries a number of days of stock left. Put the smallest at the top, check what that number counts, then subtract lead time. The order of work falls out. The eight SKUs below are invented so the arithmetic can be checked.

The hard part of reordering is not the arithmetic. It is not knowing where to start. Two hundred SKUs, a supplier email, a container somewhere, and a vague sense that something on the list is about to run out. That feeling gets treated as a judgment call, and judgment calls get scheduled as meetings.

Once the two inputs are set, the first decision is not a judgment call. Every active SKU with a usable sales rate has a days of supply figure: units available divided by units sold per day. (New SKUs, zero-velocity items and discontinued lines may not — more on those below.) Sort by it, smallest at the top, and the question “which one first?” is answered before the meeting is booked. Choosing what stock counts and whether the rate is trustworthy still takes judgment; the sort itself does not. Two more steps turn that list into a PO. This post walks all three with an invented catalogue of eight SKUs.

Step 1: sort by days of supply, lowest first

Here is the invented catalogue. Units on hand, daily rate, and the division.

Sorted lowest first: G (12.5), B (15), D (16), A (30), H (40), F (70), C (120), E (120). That is the order of attention. G, B and D are the top of the list and nobody had to argue about it.

In SKU Compass the sort is a column header. On the Supply Analysis screen, open the Inventory tab. It carries a Days Supply column, and the tab opens with the smallest values at the top; if the order has been changed, click the header until the smallest numbers sit at the top again. The shortest runway is your first row.

What to order first is a sort. What to order, and how much, are the two questions that deserve your attention, and the sort is what buys you the time to think about them.

Step 2: check what the number counts

Before you act on the list, know which question the days figure is answering. Days of supply has two honest top lines: units physically on hand, or on hand plus units already on open purchase orders. A SKU with a container due next week can look critical on the first reading and comfortable on the second, and both readings are true.

Take SKU B. Ninety on hand at six a day is 15 days. Add a 300-unit PO that left last week and it is 390 at six a day, which is 65 days. B drops from second on the list to sixth. But “on time” has to mean before the 90 units on hand run out, which is 15 days away — a PO running perfectly to a 20-day schedule still leaves a five-day hole. So the test is not whether the PO is reliable, it is whether its arrival date beats the strict reading’s countdown. If it does, B does not need a decision today. If it is stuck at a port, the 15 is the honest number.

In SKU Compass the column header tells you which reading you are looking at. It reads Days Supply (incl PO) or Days Supply (excl PO), following the Counting stock setting, whose label is Days of stock counts: with the positions Include units on open POs and On-hand only. Read the header, then read the list. Sorting on the wrong reading is how a buyer chases a SKU that is already on the water while the one with no PO behind it runs out.

Whichever reading you sort on, the other one is worth a glance for the top five rows. A SKU that is critical on both readings is critical. A SKU that is critical only on the strict reading has an inbound PO to inspect first — check its quantity and its arrival date before deciding. If the inbound is too small, or lands after the shelf empties, that SKU still needs an order.

Step 2a: subtract lead time, because 30 days is not 30 days

Days of supply on its own is a countdown to an empty shelf. What matters is the countdown to the last day you can still do something about it, and that is days of supply minus the days it takes to get more stock from this supplier to sellable.

Call the result reorder slack: the number of days until you need to place the order. Positive slack is days you have left to decide; negative slack means the order should already have gone.

One condition on that, and it matters. If you carry a safety buffer, the last day you can still act arrives before days of supply minus lead time reaches zero, because you are not willing to run to literally empty. The full form is:

Reorder slack = days of supply − lead time − safety-buffer days.

The worked table below runs at a zero safety buffer so the subtraction stays visible. Carry a seven-day buffer and every figure in the Slack column drops by seven — a SKU showing +5 is already inside its reorder point, not five days clear of it. Subtract your own buffer before you read the column as a deadline.

Re-sorted by slack the list changes shape. B, H and A are already late, in that order, and none of them was at the very top of the days sort. G, which led the days sort, is actually the easiest problem on the page: a ten-day supplier and two and a half days to act. The days sort found the right neighbourhood. The lead-time subtraction found the emergency.

This is the whole reason the reorder point exists as a concept. The reorder point is the stock level at which slack hits zero: daily demand times lead time, plus a safety buffer. Reorder slack is the same idea expressed in days instead of units — but only once both terms are subtracted. Days of supply minus lead time alone is the reorder point without its safety stock, which is why the buffer has to come out too before zero means what you think it means. If you would rather work in units, put each SKU’s rate and lead time into a reorder point calculator and compare the answer to what is on hand; a SKU below its reorder point has negative slack.

Lead time here means the full stretch from the moment you can no longer change the order to the moment units are sellable, not the supplier’s quoted production time and not the forwarder’s transit. Measure it off your own last several POs per supplier. Using the quoted number instead of the measured one is how slack comes out positive on paper and negative in the warehouse.

Step 3: take the top rows to the order quantity

The sort says who. The subtraction says how urgent. Neither says how much, and how much is a different calculation: projected demand over the window you want to cover, minus what you already have, never below the safety buffer, then rounded to whatever the supplier ships in.

In SKU Compass that calculation is the Order Estimator tab, one tab to the left of Inventory. Its primary column is Need to Order, and its help text describes the arithmetic in one sentence: projected sales over your coverage window, covering lead time plus safety plus your order cycle, minus what you already have, never below your safety-stock floor. Beside it sit COG and Cost to Order, so the top of your list can be read in dollars as well as units before anyone commits to it. Clicking a Need to Order figure opens the full math for that row.

Work the list in slack order, not days order. In the invented catalogue that means B first, then H, then A, then G, then D. The three already-late SKUs may not be rescuable at their normal lead time; that is where you decide whether air freight or a partial shipment is worth it, and that decision is easier when the list has already told you the size of the hole in days.

When the list lies

A SKU with a manual rate on it

If someone overrode the daily rate for a promotion three months ago and never cleared it, that SKU’s days of supply is built on a number that is no longer true. Any list sorted on days inherits the error. Check for stale overrides before you trust the top five.

A SKU that is being discontinued

Two days of supply on a SKU you are running down is a success, not an emergency. The sort cannot know your intentions; tag the SKU or take it off the list before the sort, not after.

A rate distorted by a stockout

Weeks you were out of stock show zero sales, and zero was not the demand. A SKU that just came back into stock after a month out will show a low daily rate, a high days of supply, and a comfortable position on the list. It may be the most urgent SKU you own. If the rate window includes a stockout, correct for it before you sort.

Slow movers at the bottom

SKU E has 120 days of supply because it sells half a unit a day. It is at the bottom of the list and that is correct, but 120 days on a slow mover is not the same comfort as 120 days on a fast one: a single wholesale enquiry can take the whole shelf. Review slow movers in units and last sale date as well as days — the day count does not stop meaning anything, it just stops being the most informative column.

What to do this week

1. Sort your catalogue by days of supply, lowest first. In SKU Compass that is the Days Supply column on the Inventory tab. Anywhere else, it is one column and one sort in a spreadsheet.
2. Read the header, then subtract lead time. Know whether the figure counts open POs. Then, for the top rows at least, take days of supply minus measured lead time. Negative means already late.
3. Take the top rows to the order quantity, in slack order. Need to Order on the Order Estimator, or your own coverage arithmetic. Place the POs in that order.

None of this removes judgment from reordering. It removes judgment from the first question, which was never a judgment question, and leaves your attention for the ones that are.