Inventory Planning Using Sales Velocity

Sales velocity is the rate at which a product sells — typically measured as units per day or units per week. It is the most important input to any inventory planning decision.

AskBiz calculates sales velocity for each product using your connected sales data:

• 7-day velocity: highly responsive to recent trends, good for fast-moving products
• 30-day velocity: balances recent and medium-term trends, good for most products
• 90-day velocity: smooths out short-term fluctuations, good for slow-moving products

To view velocity data: Inventory → Products → [select product] → Sales Velocity.

Your reorder point is the stock level at which you must place a new order to avoid running out before the new order arrives.

Reorder Point Formula:

Reorder Point = (Average Daily Sales Velocity × Supplier Lead Time in Days) + Safety Stock

Safety Stock Formula:

Safety Stock = (Maximum Daily Velocity − Average Daily Velocity) × Maximum Lead Time in Days

Example:

• Average daily sales: 8 units
• Max daily sales: 14 units (during a promotion)
• Supplier lead time: 12 days
• Max lead time: 16 days (occasional delays)

Safety Stock = (14 − 8) × 16 = 96 units

Reorder Point = (8 × 12) + 96 = 192 units

Order a new batch when stock drops to 192 units. AskBiz can set this alert automatically.

Instead of monitoring every product manually, let AskBiz alert you when products hit their reorder point.

To set up reorder alerts:

1. Go to Inventory → Alerts → Reorder Alerts

2. Select the products to monitor

3. Enter your supplier lead time for each product (or set a default by supplier)

4. Choose your safety stock level (AskBiz will calculate a suggested level based on velocity variability)

5. Toggle the alert on — you will receive a dashboard notification and email when stock hits the reorder point

For products where lead times vary significantly, set a conservative (longer) lead time to build in buffer.

Overstock is as costly as stockouts — it ties up cash and storage space. AskBiz identifies overstock automatically using a Weeks of Supply calculation.

Weeks of Supply = Current Stock ÷ Weekly Sales Velocity

Products with Weeks of Supply above your target (typically 8–12 weeks for most businesses) are flagged as overstock.

Go to Inventory → Overstock Report to see:

• Products with excess weeks of supply
• The cash value of the overstock
• Suggested actions: markdown, bundle with faster-moving products, return to supplier, or pause reordering

Regular overstock reviews (monthly) prevent slow-moving stock from accumulating over time.

Once you know when to reorder, you need to decide how much to order. The Economic Order Quantity (EOQ) formula balances the cost of holding stock against the cost of placing orders:

EOQ = √(2 × Annual Demand × Order Cost ÷ Holding Cost per Unit per Year)

AskBiz calculates EOQ for each product using:

• Your annual demand (from velocity data)
• Your order processing cost (entered in Settings → Inventory → Order Cost)
• Your holding cost (typically 20–25% of unit cost per year)

For most small businesses, ordering in supplier minimum quantities that are close to EOQ is sufficient. The exact formula matters less than avoiding the extremes of ordering too frequently (high admin cost) or too infrequently (high holding cost and stockout risk).