What is Inventory Management? (Learn the Basics & Techniques)
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Read our blog to learn more | Reorder Point Formula and Safety Stock: A Complete Guide:
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About Secret Life of Inventory:
Welcome to the Secret Life of Inventory – a show where we delve deep into the unseen world of inventory management, revealing the hidden mysteries that help small businesses (like you) optimize their workflow and succeed!
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Timestamps:
0:00 Reorder points
0:30 Safety stock
Transcription:
Now, reorder points are the kind of linked in with the next couple actually, which is safety stock. So reorder points are kind of something we talk about a lot and it's actually something that inFlow does automatically. So if you have a point set for, you know, one of your products, you'll get like a notification saying you need to order more and all that. So it's a great way of keeping on top of your stock. You just need to like kind of set it and forget it, you know, put your reorder point in. You don't have to worry about ever running out of stock ever again. Boom. Like, it's awesome. You can just automate that and you don't have to worry so much about when you're gonna run out of stock. Exactly. Exactly. And I mean you can do it manually as well. Of course, you can just put a column in your spreadsheet that has like a reorder point level or number that when you hit that level, you know that you need to order more. It's just that you have to do it by yourself, right? And like it risks-No one wants to do that. I don't want to do that. Do you want to do that? Like, I don't know. Like what if you make a mistake too and then yeah, yeah. I mean, I personally, I'm just not a big fan of spreadsheets in general, so if I can avoid having to like open up Excel ever. Avoid that panic attack of like the spreadsheet loading. Just the loading screen gives me a panic attack kind of. Just seeing Excel, I'm like, oh, oh God, here we go. Numbers, lots of numbers, you know, like. Yeah, it's good if you can just have technology do it for you. Exactly. Work smarter, not harder. Right. Thank you. Thank you. So that's what reorder point is. And again, there's a formula to figure that out and that's where the safety stock comes in. Right. So safety stock essentially is your it's like you're just in case stock. It's the stock that you have just in case something, you know, you're selling way more than you thought you were going to sell or maybe, I don't know, you had damage to some of your products and you can't sell them for whatever reason. You have that stock that you can still fulfill those orders when they come in. Because again, name of the game, you need to fulfill your orders when they come in. Yeah, no one's waiting around for you. Someone's going to go get it at somewhere else. Yeah. So you got to make sure you have what you need when you need it. So having that safety stock is integral for it and figuring out your order point, it factors in your safety stock as well. So when you're ordering stuff, you're never actually taking into the safety stock. That's not to say that your safety stock is going to sit there and be the same safety stock. It cycles in with the rest of the the inventory, but it's just ensuring that you have those levels, right. So it's not like you just put this stuff into the corner and you're like, that's my safety stock. It's more of the levels, right? So, you know, you had that stock. But again. Everything should be cycling in. Nothing should be sitting there. It's definitely a good backup plan to dip into in case anything happens.
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