Running out of stock costs you money. Every stockout is a lost sale, a disappointed customer, and a potential push toward your competitor. But the process of preventing stockouts - monitoring levels, calculating when to reorder, creating purchase orders, sending them to suppliers - is tedious, repetitive, and exactly the kind of work that should be automated.
Most small warehouse operations still create purchase orders manually. Someone checks stock levels, decides what needs reordering, opens a spreadsheet or email, types up the order, and sends it to the supplier. This works when you have twenty products. When you have two hundred, it becomes a full-time job that is prone to mistakes and always slightly behind.
The Building Blocks of Automated Reordering
Automated purchase orders are not magic. They are built on three pieces of information that you probably already have, just not in a connected system:
Current stock level. How many units of each product are in your warehouse right now? This needs to be accurate and up to date. If your stock data is wrong, automated reordering will either order too much or too little.
Reorder point. The stock level at which you should place a new order. This is typically calculated as: (average daily demand multiplied by supplier lead time) plus safety stock. If you sell 5 units per day and your supplier takes 10 days to deliver, your reorder point is 50 plus whatever safety buffer you want.
Reorder quantity. How many units to order when the reorder point is triggered. This can be a fixed quantity (always order 100), a quantity that brings you up to a maximum level, or a calculation based on economic order quantity that balances ordering costs against holding costs.
When your stock level drops to or below the reorder point, the system generates a purchase order for the reorder quantity and either sends it to the supplier automatically or queues it for your review.
Setting Up Reorder Points
The reorder point is the most important number in your automated reordering setup, and getting it wrong in either direction is costly. Too high and you are tying up cash in excess inventory. Too low and you are risking stockouts.
Start with your sales history. Pull three to six months of sales data for each product and calculate the average daily demand. Then get lead time data from your suppliers - not the optimistic number on their website, but the actual average time from order to delivery based on your experience.
Safety stock is your buffer against variability. If demand is consistent and your supplier is reliable, you need less safety stock. If demand spikes unpredictably or your supplier occasionally delivers late, you need more. A common starting point is one to two weeks of average demand as safety stock, adjusted over time as you gather data.
Do not try to set perfect reorder points on day one. Set reasonable starting values, monitor the results, and adjust. The system should make it easy to see which products triggered reorders, which ones stocked out despite the reorder point, and which ones are sitting at unnecessarily high levels.
Handling Supplier Complexity
Real-world purchasing is messier than the textbook formula suggests. Here are the complications you will encounter and how to handle them:
Minimum order quantities. Many suppliers require a minimum order value or quantity. Your automated system might want to order 20 units, but the supplier's minimum is 50. Build minimum order logic into your automation so it either rounds up to the minimum or batches multiple products from the same supplier into a single order.
Multiple suppliers for the same product. You might have a primary supplier with better pricing and a secondary supplier with faster delivery. Set up a preferred supplier hierarchy so the system defaults to your primary but can fall back to the secondary if the primary cannot fulfil the order or the need is urgent.
Seasonal demand. Average daily demand is not constant. If you sell outdoor furniture, your summer demand is dramatically different from winter. Use seasonal adjustment factors to modify your reorder points throughout the year, or manually review and adjust them at the start of each season.
Pack sizes and price breaks. Suppliers often offer better unit prices at certain quantity thresholds. If the reorder quantity is 90 units and the supplier offers a 10% discount at 100, it might make sense to order the extra 10. Smart automation can factor in price breaks and suggest optimized order quantities.
The Review Step
Fully automatic purchasing - where the system sends orders to suppliers without human review - makes some people nervous, and for good reason. A bug in your sales data or a misconfigured reorder point could generate an enormous order that no one intended.
A safer approach for most businesses is semi-automatic: the system generates draft purchase orders based on your reorder rules, and a human reviews and approves them before they go to the supplier. This gives you the time savings of automated calculation and order generation while keeping a human in the loop for final approval.
As you gain confidence in your reorder points and the system's accuracy, you can selectively enable full automation for low-risk products (cheap, fast-moving items where an over-order is not catastrophic) while keeping manual review for high-value or slow-moving stock.
Measuring the Impact
Track these metrics before and after automating your purchase orders:
- Stockout rate: The percentage of products that reach zero stock. This should decrease.
- Inventory turnover: How quickly you sell and replace stock. This should increase because you are ordering more precisely.
- Time spent on purchasing: The hours your team spends creating and managing purchase orders. This should drop significantly.
- Average stock value: The total value of inventory on hand. This should decrease as you stop over-ordering.
If your stockout rate is going up, your reorder points are too low. If your average stock value is going up, you are over-ordering. Use these signals to refine your parameters.
Getting Started
You do not need to automate everything at once. Start with your top twenty products by sales volume. These are the items where stockouts hurt the most and where the data is best because you have the most transaction history. Set reorder points, configure supplier details, and run in semi-automatic mode for a month. Once you are confident, expand to the rest of your catalogue.
Storq is designed to make this kind of automation accessible to growing warehouses. The goal is always the same - spend less time on repetitive purchasing tasks and more time on the parts of your business that actually need human judgement.