How much to order: the inventory maths of a 300-orders-a-month startup
Reorder point and safety stock, reduced to something an online seller can calculate in a spreadsheet without relearning statistics.
A question I get almost every week, always in the same shape: "I sell around 300 orders a month — how much should I order each time?"
The short answer is that nobody can tell you from the number 300 alone. The long answer is entirely within your reach, and it needs only four numbers.
The four numbers you actually need
Before any formula, gather exactly these four things. Missing any one of them turns everything downstream into decorated guesswork.
| Number | What it means | Where to get it |
|---|---|---|
| Average daily demand | How many units you sell per day | Total orders over 90 days, divided by 90 |
| Lead time | From placing the order to stock on your shelf | Real purchase history, not the supplier's promise |
| Demand variability | How far a busy day sits from a normal day | Standard deviation of daily demand |
| Target service level | How often you accept running out | Your call — usually 90–95% |
Safety stock: the buffer for days that do not go to plan
Safety stock is the extra inventory you hold against two risks: selling more than expected, and stock arriving later than expected.
The textbook formula is heavy. The working version:
Safety stock = Z × standard deviation of daily demand × √(lead time)
Where Z corresponds to your chosen service level:
- 90% service level → Z = 1.28
- 95% service level → Z = 1.65
- 99% service level → Z = 2.33
Do not reach for 99% straight away. The gap between 95% and 99% sounds small, but the inventory you must hold rises by more than 40%. For a startup short on working capital, that is dead money sitting in a warehouse.
Reorder point: when to press the button
When stock falls below this threshold, you order immediately:
Reorder point = (average daily demand × lead time) + safety stock
A worked example for a fast-moving product:
- Average demand: 10 units/day
- Actual lead time: 12 days
- Standard deviation of daily demand: 4 units
- Target service level: 95% (Z = 1.65)
Safety stock = 1.65 × 4 × √12 ≈ 23 units
Reorder point = (10 × 12) + 23 = 143 units
Meaning: when the warehouse is down to 143 units, you place the order. Not earlier, not later.
Why this number matters more than it looks
Most startups I meet are stuck in a paradox: holding too much inventory and running out of stock at the same time. It sounds contradictory but it is easy to explain — they over-order slow movers and under-order fast movers, because the decision is made on instinct rather than on per-SKU demand.
Calculating a reorder point per SKU, even for just your ten best sellers, usually frees up a meaningful amount of capital without any new investment at all.
What to do this week
- Export the last 90 days of sales to a spreadsheet
- Calculate average daily demand and standard deviation for your ten best sellers
- Go back through purchase history and write down each supplier's actual lead time
- Apply both formulas and put the reorder point next to each SKU
That is all. No software, no consultant. These four steps are usually enough to end most of your surprise stockouts.