Key takeaways
- Use adjusted sales velocity.
- Measure real lead times by supplier.
- Reorder point equals lead-time demand plus safety stock.
- Review forecast error regularly.
Know your sales velocity
Calculate average daily sales by product, using a period long enough to smooth noise but recent enough to reflect trends. Adjust for stockouts, promotions and seasonal peaks so velocity represents genuine demand.
Measure total lead time
Lead time runs from placing the order to sellable stock at Amazon. Include production, inspection, transit, customs, preparation and receiving. Track actual lead times for each supplier, because the average often hides delays.
Set the reorder point
The reorder point is the stock level at which you should place a new order, roughly demand during lead time plus safety stock. Review it regularly as sales and lead times change.
- Daily sales velocity
- Total lead time
- Safety stock
- Pipeline stock already ordered
Calculate safety stock
Safety stock covers variation in both demand and lead time. Products with unpredictable sales or unreliable suppliers need more. Compare the cost of holding extra stock with the cost of a stockout and set a service level you are comfortable with.
Decide order quantities
Order quantity balances supplier minimums, freight costs, storage costs and cash. Larger orders may reduce unit cost, but increase storage and risk. Model several quantities and compare total cost.
Review forecasts regularly
Compare forecasts with actual sales each month, and adjust. Track forecast error by product so you know which items need more safety stock or more frequent review.
Use a planning tool or spreadsheet
Spreadsheets work well for modest catalogs, while larger catalogs benefit from planning software. Whatever you use, document the assumptions and keep the inputs current.
A worked example
A seller with a ten-week lead time notices a product's sales trend rising. Using velocity and lead time, they calculate that current stock plus the inbound pipeline will run out before the next order could arrive. They place a larger order and ship part of it by faster transport.
Common mistakes
Typical mistakes include using outdated sales data, ignoring lead-time variation and forgetting units in transit. Review reorder points monthly for key products.
A simple monthly planning routine
Once a month, refresh sales velocity for each product, update lead times from recent orders, recalculate reorder points and compare them with current stock and inbound units. Flag products that are below their reorder point and decide quantities. Then check supplier minimums and cash available.
Finish with a short note to leadership listing planned purchases, the cash they need and any risks, such as a long lead time or a supplier delay. Planning is easier to defend when it is written down.
Your next three steps
Set up a monthly planning routine.
- Refresh sales velocity and real lead times for your top products.
- Recalculate reorder points and compare with stock plus inbound.
- Write a short note of planned purchases and the cash they need.
Key terms
A few terms used above, in plain language.
- Lead time: the time from placing an order to having sellable stock.
- Reorder point: the stock level that triggers a new order.
- Sales velocity: average units sold per day.
Frequently asked questions
How often should I recalculate reorder points?
Monthly for key products and after any large change in demand or lead time.
Is a spreadsheet enough?
For many sellers, yes, if it is maintained.
This guide is general information. Amazon's fees, policies and program rules change and vary by marketplace, so confirm current details in Seller Central and, for tax or legal questions, with a qualified adviser.