Inventory restock

One of the main challenges in keeping inventory in stock is purchasing the right amount of products at the right moments. If you restock too late or too little, the item will go out of stock, and the business will miss revenue. If you restock too much, you freeze the capital, occupy more physical storage space, and risk staying with obsolete products in stock.

Due to demand changes, seasonality, supply chain delays, and a multitude of other factors, an absolutely precise process is hardly possible. However, an approximation that will get you closer to the optimum can be reached.

Step 1. Identify inventory to restock

With the Stock Roll app, you can find all the inventory at risk of going out of stock soon in the “Understock” report right inside the Shopify admin interface.

By default, it shows a few columns described below for every item requiring restocking.

Absolute quantity shows the number of items available for sale plus the number of items known to be incoming. The column is color-coded as follows:

• Black: the item is already out of stock, and no purchases to address this have been made yet;
• Red: the item is in stock at the moment, but it will likely go out of stock before a new shipment arrives, causing a potential loss of revenue;
• Yellow: the item is in stock, and the level is above critical, but to prevent it from going out of stock, the purchase is expected to be made until the end of its replenishment window.

Optimal min/max are the recommended boundaries for keeping the item quantity within to balance the item availability and capital invested in it. In an ideal case, once the item stock level hits the optimal minimum, restock it up to the optimal maximum, repeating the process for the whole product lifetime.

Note that setting up proper parameters in the app settings is crucial to get realistic min/max values. See:

• Configuring lead time
• Configuring replenishment schedule

If you are curious about the details of the optimal min/max calculation, make sure to read: Math behind optimal supply chain

Replenishment window from/to is a suggested date span to make the purchase. It directly correlates to the current absolute quantity and optimal min/max described earlier. It can be in the past, meaning that the optimal moment was already missed or around today’s date for “yellow” items.

Estimated revenue miss is the total value of lost sales at the current price and demand level due to ongoing or forecasted out-of-stock. Even if the item is still in stock, it can have revenue miss attributed because there’s not enough time for the next shipment to arrive before it is sold out completely.

By default, the “Understock” report is sorted by the estimated revenue miss. This allows you to quickly understand which items require the most attention to minimize the business impact.

REPL! (Recommended replenishment) is a quick summary of all the calculations that have been done. It shows how many items must be restocked to keep the stock safe.

Once you purchase at least the quantities shown in the “REPL!” column, the items will disappear from the “Understock” report until their next purchase cycle or severe demand increase.

Step 2. Focus on an inventory segment

Except for the simplest cases, reordering all inventory at once is unfeasible. It’s better to focus on a single vendor/supplier/collection, make a purchase order, and then repeat the process for other items left for review.

The inventory segment can be narrowed using the filter bar at the top of the “Understock” report.

Step 3. Making a purchase

Once you have identified the items to reorder along with the required quantities, it’s time for a purchase order.

• Create a new draft purchase order (PO) using the built-in Shopify admin functionality;
• Contact the supplier or use its online platform to make the actual PO;
• Once the purchase order is confirmed, mark it as ordered in the Shopify admin interface.

The last item is essential because it adds the quantities ordered to the “Incoming” column of the respective inventory items. Stock Roll relies on these quantities to understand what has already been reordered and adjusts the reports accordingly. Please note that it can take up to ~10 minutes for the Stock Roll app to ingest a new PO or a change in it.

Step 4. Receive the items

Once the shipment arrives, receive the items using the built-in Shopify PO interface and close the purchase order. The Stock Roll app will follow the changes.