Inventory glossary

What is Low stock threshold?

Low stock threshold is the quantity on hand that triggers a restock alert or reorder action for a SKU.

A low stock threshold tells you when to stop waiting and start acting. If you set it well, you get a warning early enough to order, wait out the lead time and still have stock on the shelf. If you set it too low, you run out before the new stock arrives. If you set it too high, you order too often and tie up cash in inventory you did not need yet.

The threshold should be based on how fast the item sells and how long the supplier takes to deliver, not a flat number across all products. A slow candle might need a threshold of 10 units. A fast-selling t-shirt in one size might need a threshold of 60 units. Review thresholds every few months, because sales speed and lead times change.

Formula

Low stock threshold = Average daily sales x Lead time in days + Safety stock

Example

A candle shop sells 4 units a day of its best seller. The supplier takes 10 days to deliver. The store keeps 15 units of safety stock. Low stock threshold = 4 x 10 + 15 = 55 units. When stock hits 55, it is time to reorder.

Common mistakes

Using the same threshold for every SKU regardless of how fast it sells.
Setting the threshold once and never updating it as sales or lead times change.
Forgetting to include safety stock, so the threshold only covers average demand and not spikes.

Low stock threshold and SteadyShelf

SteadyShelf calculates an order-by date per SKU from each supplier's lead time, which works like a smarter version of a low stock threshold tied to actual reorder timing instead of a fixed number.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

Full inventory glossary

FAQ

Is a low stock threshold the same as a reorder point?

They are close. A low stock threshold is often just an alert trigger, while a reorder point is the specific quantity used to decide when to place an order. Many small stores use the two terms interchangeably.

Should every product have the same low stock threshold?

No. Fast-selling items need a higher threshold because they run out quickly, and items with long supplier lead times need more buffer. Set thresholds per SKU based on sales speed and lead time.

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