How to Set Reorder Points and Safety Stock for a Kirana Store

Most small shops reorder by looking. When a shelf looks low, someone calls the distributor. That works for fast items you see every hour. It fails for the slower ones you only notice when a customer asks and you have none. And it fails when the person who usually looks is away.

Two numbers replace the guessing. The reorder point is the stock level at which you place the next order. Safety stock is the extra you keep for the days when sales run high or the supplier runs late.

You need three things to work them out: your sales figures, your supplier's real delivery time, and about ten minutes per product. Start with your top 50 items. They usually make up most of your sales.

Take the units sold over the last four to eight weeks and divide by the number of days the shop was open. Use units, not rupees. Choose a period of normal trade. If the last month included Diwali, use a longer period, or accept that the number will be high.

Kirana example. A 5 kg pack of a popular atta brand sold 168 packs in the last 28 days. Average daily sales are 168 ÷ 28 = 6 packs.

Pharmacy example. A common paracetamol strip sold 270 strips in 30 days. Average daily sales are 270 ÷ 30 = 9 strips.

Note the busiest day in the period too. For the atta it was 10 packs. For paracetamol it was 15 strips. You will need these in Step 3.

Lead time is the number of days from placing an order to having the goods on your shelf. Not the day the supplier promises. If your distributor says next day but stock usually lands two days after a phone order, your lead time is 2 days.

Look at your last five or six orders and note the real gap each time. Write down the usual figure and the worst one. The difference between them is exactly what safety stock is for.

In our examples, the atta distributor usually delivers in 3 days, and once took 5. The pharmacy's stockist usually delivers in 1 day, and at worst in 2.

A simple method that works well for small shops: safety stock = (busiest daily sales × longest lead time) minus (average daily sales × usual lead time).

Atta: 10 × 5 = 50 in the bad case, and 6 × 3 = 18 in the normal case. Safety stock is 50 minus 18 = 32 packs.

Paracetamol: 15 × 2 = 30 in the bad case, and 9 × 1 = 9 in the normal case. Safety stock is 30 minus 9 = 21 strips.

If that buffer feels too large for your cash or shelf space, trim it for items customers will happily substitute. Someone will take another brand of atta more readily than they will accept a missing medicine. Keep the full buffer for the things people come to you specifically for.

Reorder point = (average daily sales × usual lead time) + safety stock.

Atta: 18 + 32 = 50 packs. When stock falls to 50, place the order. Paracetamol: 9 + 21 = 30 strips.

Then decide how much to order. A common approach is a maximum level, and you order enough to bring stock back up to it. If you want each atta order to last about two weeks, the maximum is roughly the reorder point plus 14 days of sales: 50 + 84 = 134 packs. Round to the case size. If the atta comes in bales of 10, order up to 130 or 140.

Now check the money. If each atta pack costs you ₹230, a safety stock of 32 packs ties up ₹7,360. That is the price of never running out of your best-selling atta. Do this check for your expensive items so you know where your cash is sitting, and decide where a smaller buffer is acceptable.

These numbers go stale. A new shop opens nearby, a school reopens, a brand raises its price. Review the numbers on a fixed rhythm.

Plan ahead for festivals, weddings and the monsoon. Some items sell double for a few weeks. Use the same weeks last year as a guide, and raise the reorder point before the rush, not during it.

For a pharmacy, and for any kirana item with a short shelf life, never set a maximum higher than you can sell well before expiry. Extra stock of a product with three months' life is not safety. It is a future write-off.

• Fast movers: review every month.
• Slow movers: review every quarter.
• Seasonal items: set a separate reorder point for the season.
• Short-expiry items: cap the maximum at what sells comfortably within the shelf life.

Okount's inventory module offers min/max replenishment with an editable order quantity, and reorder suggestions that arrive before the shelf is empty. Demand is taken as the higher of the recent fortnight and the long average, lifted when the same weeks last year were busier, and each suggestion says which of those it used. Batches are tracked with expiry, so you can see what is about to expire before ordering more.