An empty shelf costs twice. You lose the sale, and the customer who wanted it learns to try the shop next door. Over-ordering costs too: cash sits on a shelf while the rent is due. The reorder point is the simple tool that balances the two, and it works for a one-till shop as well as for a chain.
The idea in one sentence
A reorder point is the stock level at which you place the next order, chosen so the new delivery arrives just before the shelf runs out. It depends on two things you can measure: how fast the item sells, and how long the supplier takes to deliver.
The basic formula is:
Reorder point = average daily sales × supplier lead time in days + safety stock
If you sell six bottles of a cooking oil a day and your wholesaler takes four days to deliver, you will sell twenty-four bottles while waiting. Order when you are down to twenty-four plus a buffer, and the shelf stays stocked.
Measure, do not guess
Average daily sales should come from the till, not from memory. Take the last eight to twelve weeks of sales for the product, divide by the number of trading days, and you have the rate. Do this per branch: the same product can sell at very different speeds in Kampala and in Mbale.
Lead time is the gap between placing the order and the goods being on the shelf, which includes the supplier's delivery time plus your own receiving and shelving. Record the order date and the delivery date on each purchase and use the actual average, not the day the supplier promised.
Safety stock: how much buffer
Safety stock is the extra you hold for the days when sales spike or the delivery is late. There is no single right number, but the logic is straightforward: the more variable your sales and the less reliable your supplier, the bigger the buffer. A practical starting rule for a small shop is to hold two to five extra days of sales for fast movers and almost none for slow movers.
Two things in the current environment argue for being deliberate about buffers rather than ignoring them. The Bank of Uganda noted in May 2026 that higher global oil prices had contributed to a 5.4 percent depreciation of the shilling between February and April, which feeds straight into the landed cost and the availability of imported goods. And the Uganda Bureau of Statistics reported that annual inflation for the twelve months to September 2026 was 4.6 percent, up from 4.1 percent in the year to August. When prices are moving, holding a sensible buffer of key lines is protection against both stock-outs and the next price rise.
Set the reorder quantity too
The reorder point says when; the reorder quantity says how much. For most retail lines the sensible quantity is enough to cover the review period (how often you place orders with that supplier) plus the lead time, minus whatever is already on order. If you order from a wholesaler every week and they take four days, each order should cover roughly eleven days of sales. Round to the supplier's carton size and respect any minimum order.
Classify before you calculate
Not every product deserves the same attention. Rank your products by sales value over the last quarter. The top fifth of products typically account for most of the value, and those are the lines whose reorder points you review monthly. The middle group can be reviewed quarterly. The long tail of slow movers should probably be ordered only when a customer asks, or dropped.
Use the alerts you already have
Most modern tills, and URA's own EFRIS portal, can flag low stock. URA lists knowing when to re-stock through the low stock alerts functionality as one of the business benefits of EFRIS stock management. The alert is only as good as the threshold behind it, which is why the formula above matters: an alert set at "ten units" for every product is noise, while an alert set at each product's reorder point is a shopping list.
A monthly review in fifteen minutes
- Pull the list of products that hit zero stock last month. Raise the reorder point or the buffer on each.
- Pull the list of products with more than ninety days of stock on hand. Lower the reorder quantity or stop ordering.
- Check actual lead times against the figure in the system for your three biggest suppliers.
- Adjust alert quantities for anything seasonal that is about to pick up.
Done every month, this review turns the reorder point from a number you set once into a habit that keeps the shelf full and the cash moving.
Sources
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