I order from my supplier on the first of every month: is ordering at a reorder point better than a fixed date?
A reorder point makes your orders move with sales: in busy weeks you reach it sooner and order sooner, in quiet weeks later. A fixed date on the 1st is simpler to organise, but it cannot see a mid-month jump, so you can run out before your date. The calculator is built for the first method and does not calculate order quantities for fixed schedules, but you can use its point as a warning level between order dates.
The difference in two lines
- A fixed date asks: how much do I order this time? The date never changes.
- A reorder point asks: when do I order? The timing moves with how fast you sell.
Each has its place. A fixed date suits a supplier who batches customers' orders on a set day, or when you order many products from one supplier in a single shipment. A reorder point suits a product whose sales swing, or one that is costly to run out of.
Example: a normal month and a busy one
You usually sell 20 units a day, the lead time is 12 days and safety stock 60 units. The calculator gives demand during lead time of 20 × 12 = 240 and a reorder point of 240 + 60 = 300 units. You start the month with 900 units.
Normal month, 20 a day: you sell 600 units in 30 days, reaching 300 units around the end of the month, near your fixed date. Both methods agree.
Busy month, 30 a day: you sell 600 units in 20 days, reaching 300 units on day 20, ten days before your fixed date.
In the busy month, waiting for the 1st means the remaining ten days plus a 12-day lead time, far more than 300 units can cover.
That is the weak spot of a fixed date: it is built around a normal month, and the busy month is exactly the one you least want to run out in.
If you want to keep your fixed date
- Work out the reorder point for each important product in the Inventory reorder-point calculator.
- Treat it as a warning level: if stock, including anything in transit, reaches the point before your fixed date, send an extra order straight away instead of waiting.
- On your fixed date, order as usual. The calculator does not work out how much to order, so set the quantity your usual way, allowing for the supplier's minimum.
- Recalculate the point when average sales or lead time change, because the calculator does not update it for you.
What each method costs you
Ordering at the point means orders on unpredictable days, and perhaps smaller, more frequent shipments, each with its own cost. A fixed date means occasional stockouts, and extra stock in quiet months. Track what you spend on shipping and orders under each approach with the Expense summary generator to see which is really cheaper for your business. However you order, send a clear purchase order with the Purchase-order generator.
Common questions
Does the calculator work out the monthly order quantity?
No. It works out the stock level to order at, and does not calculate order quantity, supplier minimums or holding costs.
My supplier only accepts monthly orders. Is the point any use to me?
Yes, as an early warning. If you can see you will hit it before the date, order more on the previous date, or agree an exception with the supplier for busy months.