Maintaining optimal stock level with Stock Roll
The main page of the Stock Roll app is a dashboard. It presents a table with all the products for which you manage stock, along with some computed quantity values. The most interesting value for a quick overview is in the “Repl” (Recommended Replenishment) column.
It shows how many units of a specific inventory item you need to replenish now (i.e., purchase, transfer, or manufacture) so that the item stays in stock given its current demand and lead time.
In its simplest form, the workflow is the following:
- Go to the Stock Roll dashboard
- Filter by the vendor you’re now focusing on
- Find out which items need to be ordered by using the “Repl” column
- Make a purchase or request a quotation using the given quantities
- Record it as a new Purchase order or Transfer in the Shopify admin
- Repeat for other vendors when necessary
The recommended replenishment calculation uses a few parameters you should set up before using Stock Roll: lead time and replenishment cycle. Both parameters are available on the Stock Roll settings page.
Setting up lead time
Lead time for an inventory item is the total duration from when you decide that the item should be replenished (e.g., when you purchase it from a vendor) to when it becomes available for sale in your store.
The lead time includes:
- Time to get a quotation and invoice
- Time to settle the payment
- Time to manufacture and dispatch the item
- Time to consolidate it for a bulk shipment
- Time to deliver to your warehouse
- Time to receive and control the quality of the shipment
- Time to reflect the received quality in Shopify
Depending on your business, the total lead time can vary from a day to a few months. If the lead time for a particular product varies depending on factors out of your control, be moderately pessimistic and choose the value closer to the upper bound. This way, you will stay in stock even if the negative scenario happens, though at the expense of slightly more investment in the warehouse.
Put the most generic lead time value, which covers most items, in the default setting. Then, you can override it for specific products with custom rules. Such a rule applies to either:
- A specific product
- All products of a particular vendor
For example, you might have two weeks lead time for all your products, three months for a couple of products that are long to manufacture, and three days for all products of one local and agile vendor.
Setting up replenishment cycle
The replenishment cycle reflects how often you review a particular item.
Theoretically, one should review continuously, corresponding to one or even zero days. But in practice, it is impossible due to limited time, minimal order quantities, and a vast product matrix.
For example, if your buyers quote Vendor A on Mondays, Vendor B on Tuesdays, and Vendor C on Fridays, the replenishment cycle will be seven days because the review interval for any particular vendor is one week.
Getting a better understanding
For less important products with more or less stable demand, it’s OK to use the “Repl” column outcome and purchase that quantity if it sounds reasonable. However, it is wise to know how that recommended replenishment quantity is computed in more complex and important cases.
It’s only math, after all, with a limited set of inputs. You might better understand the overall picture in uncertain cases. To understand what’s under the hood, please read: Math behind optimal stock supply chain