Inventory how-to

Why lead time matters more than you think

Lead time sets how early you must order, and small errors in it cause stockouts or excess stock weeks later.

Short answer: Lead time sets how early you must order, and small errors in it cause stockouts or excess stock weeks later. Most reorder mistakes trace back to a lead time that was guessed once and never checked, not to bad sales forecasts.

It decides your order-by date, not just your stock level

Your reorder point is daily sales multiplied by lead time plus safety days. If lead time is wrong, the reorder point is wrong, even if your sales forecast is perfect. A good forecast with a bad lead time still produces a stockout or a pile of excess stock.

Lead time is rarely one fixed number

Suppliers quote a lead time that assumes no delays, but production backlogs, holidays, customs and shipping all add days. If you only ever use the quoted number, you are always ordering a bit too late. The real lead time is the time from placing the order to the stock being available to sell, not the time the supplier says it takes to make the item.

Small errors compound over the lead time window

A 3-day underestimate on a fast seller does not feel like much on paper, but it means 3 days of sales come out of safety stock that was not meant to cover it. On slow movers the same error barely matters. The faster the item sells, the more a lead time error costs you.

Different suppliers need different treatment

A domestic supplier with a 5-day lead time and an overseas supplier with a 45-day lead time cannot share one safety buffer or one review cycle. Treating all suppliers the same is a common reason reorder points look fine on average but fail for specific SKUs.

Step by step

  1. List every supplier's actual lead time based on past orders, not their quoted promise.
  2. Track the date you place each order and the date stock is receivable, and note the gap.
  3. Update each supplier's lead time whenever you see a pattern of delay or improvement.
  4. Set safety days per supplier based on how variable their lead time has been, not a flat number for all.
  5. Recalculate reorder points whenever a lead time changes, not just once a year.
  6. Flag your fastest-selling SKUs for closer lead time tracking since errors there cost the most.
  7. Review lead times at least quarterly, more often for overseas or unreliable suppliers.

Worked example

A supplier quotes a 20-day lead time, but your last five orders actually took 27 days to arrive. The SKU sells 6 units a day, and you carry 5 safety days. Using the quoted 20 days, your reorder point is 6 x (20 + 5) = 150 units. Using the real 27 days, it should be 6 x (27 + 5) = 192 units. That 42-unit gap is 7 days of stock you did not plan for, which is enough to run out before the next delivery.

How SteadyShelf helps

SteadyShelf uses the lead time and safety days you set per supplier to calculate the order-by date and reorder point for each SKU, and recalculates as your sales data updates. It does not automatically detect that a supplier is running late, so you still need to update the lead time yourself when you notice a pattern of delays.

$29/month flat, unlimited products and suppliers, 30-day free trial. Run the numbers now with the free reorder point calculator.

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FAQ

Should I just add extra safety days to cover an unreliable lead time?

You can, but it is better to fix the lead time number first and add safety days on top for the remaining variability. If you pad safety days to cover a lead time that is simply wrong, you end up carrying permanent excess stock instead of ordering at the right time.

How often should I update lead times for each supplier?

Check after every few orders for new or unpredictable suppliers, and at least quarterly for established ones. Any time you notice deliveries consistently arriving earlier or later than planned, update the number right away rather than waiting for a scheduled review.

Let SteadyShelf do this math for every SKU

Order-by dates per supplier, seasonal forecasts and draft POs for your Shopify store. $29/month after a 30-day free trial.

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