There are two big questions any purchasing department needs to answer:
- When should you reorder more inventory?
- How many units should you order?
When you act as the purchasing department, the marketing department, and the sales department, it's difficult to find the resources to determine this on your own. Zentail's Reorder Report is designed to give you all the tools necessary to make this a simple decision. Taking it one step further, we suggest an Optimal Reorder Frequency for you based on the (Q, r) model.
Using historical sales data for your SKUs, taking into account lead time and holding cost, Zentail's Reorder Report calculates all of the most important metrics for your catalog. This article will review how to access and use the Reorder Report, how to interpret each metric, and answer some frequently asked questions.
Using the Reorder Report
You can access the reorder report by going to reorder button on your header in Zentail. The first thing you'll notice is the Reorder Summary. Below that is a Products table (you can also download this table to a csv). Clicking on a SKU within this Product table opens up a detailed chart with further information for a given SKU.
This is a visual representation of your catalog through a segmented bar chart. Your catalog is broken down into five segments according to how many days in inventory you have in stock. The five segments are:
- Less than 1 day
- 1 to 7 days
- 8 to 30 days
- 30+ days
- Not enough order data
In most situations, you'll want to minimize the number of SKUs that have less than 1 day in stock. SKUs are categorized as having "Not enough order data" if they've never had any sales.
You can click on each segment in the Reorder Summary to reveal those SKUs on your Products table.
This section gives you a view of your SKUs within a certain segment, and displays some of the most important metrics for reordering. This can also be downloaded to a csv.
A description of the headers in this table are as follows:
SKU - Clicking the SKU on this table opens a new tab for your Catalog page. You can then edit any necessary information, like cost for this SKU.
Lead Time - Lead time is the number of days from when you place an order until it actually arrives at your warehouse. Currently, we assume this to be 7 days for all SKUs.
Reorder Frequency - More information coming soon, including an explanation of a negative Reorder Frequency.
Units / Day - This is the sales velocity of your SKU, or how many units per day we expect you to sell based on your most recent sales for that SKU. We only calculate sales while that SKU is in stock (meaning if it goes out of stock, we won't recalculate its sales velocity until it comes back in stock).
In Stock - This is the total inventory available for this SKU. It includes inventory across all warehouses.
Reorder Level - This is the point at which you should place another order for this SKU. If you have a Reorder Level of 15 units with 16 units in stock, then you should wait until 1 more unit sells before reordering that SKU. If your Reorder Level is below the number of units in stock, you should have reordered that SKU already!
Order Quantity - This is the amount you should order for a given SKU once your inventory reaches, or falls below, the reorder level.
Days to Reorder - This estimates how many days will go by before you need to place an order for that SKU. It is calculated based on your sales velocity and the amount in stock. For example, if have 100 units in stock, your sales velocity (units / day) is 10 units per day, and your reorder level is 50, we estimate it will be 5 days until you have to reorder this SKU.
Days to Stock Out - This calculates how many days of inventory you have for that SKU given the current sales velocity and in stock inventory.
Item Price - This is simply the item price for which a shopper can purchase SKU. It helps us calculate your opportunity cost.
Opportunity Cost - This displays how much profit will be lost given the inventory conditions of your SKU and your calculated profitability. If your SKU is going to be out of stock for a given number of days (Days to Stock out - Lead Time), you will have an opportunity cost based on the number of sales you would lose out on while this SKU is out of stock. We use the average profit for this SKU, which takes into account the cost, marketplace commission, and shipping cost associated with the SKU.