What is a good inventory level?

Asked 2 years ago

Hi fellow Shopify store owners, I was doing an inventory analysis, and I'm still struggling to figure out the delicate balance between not having enough and having too much stock. What have you found is a good level to have?

Hugh Russell

Tuesday, March 22, 2022

Establishing the correct inventory level and maintaining a practical stock balance can be calculated quite easily. By following these formulas you can establish the core five stock levels and always have a guideline that suits your business.

Minimum Inventory Level = Maximum Sales x Maximum lead time - (Average sales x Average lead time)

Maximum Inventory Level = Reorder level + Reorder Quantity - (Minimum sales x Minimum Reordering Period)

Average Level = Minimum stock level + 1/2 Reorder Quantity

Danger Level = Average sales x Maximum Emergency Reorder period

Reorder Level = Maximum sales x Maximum Reorder Period

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