Low Stock Alerts & Reorder Levels

Running out of a critical raw material at the wrong moment is one of the most expensive mistakes in manufacturing. A missing batch of M10 bolts can halt an entire assembly line. A shortage of hydraulic oil can delay machine testing. A stockout of packaging material can prevent dispatch of finished goods that are ready to ship.

Reorder levels and low stock alerts are your early warning system. Configured correctly, they give you enough lead time to replenish stock before a shortage disrupts production.

What You Will Learn

• The concept of reorder levels and how they prevent stockouts
• How to calculate reorder points using consumption data and lead times
• The role of safety stock as a buffer
• Max stock level and its use in preventing overstocking
• How to configure reorder levels per item in Udyamo ERP Lite
• How low stock alerts work in the system
• Best practices for setting levels across different item categories

Prerequisites

• Items are created with stock tracking enabled (Chapter 7)
• You have a basic understanding of the stock ledger (Chapter 10)
• You know your approximate consumption rates and vendor lead times

The Reorder Level Concept

The reorder level (also called the reorder point) is the stock quantity at which you should initiate a new purchase order. When the running balance of an item at any location drops to or below the reorder level, the system flags it as a low-stock item.

The goal is simple: order early enough that new stock arrives before the existing stock runs out, but not so early that you accumulate unnecessary inventory.

A Practical Example

Your manufacturing line consumes approximately 100 kg of MS Plate 6mm per day. Your primary vendor takes 7 days to deliver after you place an order. If you wait until stock reaches zero to order, you face 7 days of production downtime.

Instead, you set the reorder level at a point that accounts for the lead time:

Reorder Level = Average Daily Consumption x Lead Time in Days

Reorder Level = 100 kg/day x 7 days = 700 kg

When stock drops to 700 kg, the system alerts you. You place the order. Seven days later, the new stock arrives just as the old stock is about to run out.

Safety Stock

The basic reorder formula assumes that both consumption and lead time are perfectly predictable. In reality, they are not:

• A large order from a customer may spike your consumption of raw materials
• A vendor may deliver 2 days late due to transport issues
• A quality rejection may render part of a delivery unusable

Safety stock is the buffer that absorbs this variability. It is the extra quantity you keep above the bare minimum to protect against unexpected demand or supply delays.

Reorder Level (with safety stock) = (Average Daily Consumption x Lead Time) + Safety Stock

Continuing the example:

• Average daily consumption: 100 kg
• Lead time: 7 days
• Safety stock: 200 kg (approximately 2 days of extra buffer)

Reorder Level = (100 x 7) + 200 = 900 kg

With this configuration, even if the vendor is 2 days late or consumption spikes temporarily, you have enough buffer to avoid a stockout.

How Much Safety Stock?

There is no single formula that works for every item. Consider these factors:

Tip: A common starting point is to set safety stock equal to 1 to 3 days of average consumption for most items, and higher (5 to 7 days) for critical items with unreliable supply. Refine these numbers over time as you gather actual consumption and lead time data from the ERP.

Max Stock Level

The max stock level is the upper limit for stock of an item. It serves as a guideline to prevent over-ordering.

Max stock level is useful in the following situations:

• Storage constraints — Your warehouse can only hold 5,000 kg of a particular item
• Shelf life — An item expires in 6 months, so ordering more than 3 months of consumption is wasteful
• Cash management — You do not want more than a certain rupee value tied up in any single item
• Hazardous materials — Regulatory limits on how much of certain chemicals you can store

Example:

When the max stock level is configured, it provides a reference point for purchase planning. The ideal reorder quantity (also known as the economic order quantity) roughly fills the gap between the current stock and the max stock level.

The Reorder Point Formula

Putting it all together:

Reorder Point = (Average Daily Usage x Lead Time in Days) + Safety Stock

Reorder Quantity = Max Stock Level - Reorder Point

Complete example for Bearing 6205:

When stock of Bearing 6205 drops to 200 pcs, the system alerts you. You place an order for approximately 800 pcs. When the order arrives, stock is replenished close to the max level.

Configuring Reorder Levels in Udyamo ERP Lite

Reorder levels are set on the Item master. To configure them:

1. Navigate to Inventory > Items
2. Select the item (e.g., MS Plate 6mm)
3. Click Edit
4. Set the following fields:
   • Reorder Level: 900 (the quantity at which a low-stock alert is triggered)
   • Max Stock Level: 5000 (the upper stock limit)
5. Click Save

Required: The item must have Track Stock enabled for reorder levels to be meaningful. Items with stock tracking disabled (such as service items) do not participate in stock alerts.

Repeat this process for each item that needs reorder monitoring. Focus on items that are:

• Critical to production (raw materials for your main products)
• Expensive (where stockouts or overstocking have significant financial impact)
• Long lead time (where you need early warning to order in time)

Low Stock Alerts and Dashboard

When the running balance of an item at any location drops to or below the reorder level, Udyamo ERP Lite flags it as a low-stock item.

How Alerts Work

The system compares the current running balance (from the stock ledger) against the reorder level set on the item. When the balance meets or falls below the threshold:

• The item appears on the Low Stock dashboard or alert list
• The alert includes the item name, current stock, reorder level, and the location(s) affected

Viewing Low Stock Items

1. Navigate to Inventory > Items or the Dashboard
2. Look for the low-stock indicator or filter for items below reorder level
3. Review the list and initiate purchase orders for the flagged items

The low stock view typically shows:

Tip: Make it a daily practice — ideally first thing in the morning — for your purchase team to review the low stock dashboard. This simple habit prevents most stockout situations.

Best Practices for Setting Reorder Levels

Categorize Items by Criticality

Not all items deserve the same attention. Use a simple ABC classification:

Account for Seasonal Demand

If your business has seasonal patterns — for example, higher demand for agricultural machinery before the planting season — adjust reorder levels seasonally. A static reorder level that works in a slow quarter may be dangerously low in a peak quarter.

Factor in Vendor Reliability

If a vendor has a history of late deliveries, increase the lead time assumption in your reorder calculation. It is better to carry a little extra stock than to shut down production because you trusted an optimistic lead time.

Review and Adjust Quarterly

Reorder levels are not set-and-forget. Review them at least quarterly using actual data from the ERP:

• Has your average daily consumption changed?
• Has the vendor's lead time improved or worsened?
• Have you experienced any stockouts since the last review?
• Are you carrying excess stock that is tying up cash unnecessarily?

Udyamo ERP Lite's stock ledger provides the data you need to answer these questions. Calculate the actual average daily consumption from the last 90 days and compare it against your current reorder level assumptions.

Long Lead Time Items Need Special Attention

Items that take 30 to 60 days to procure — imported specialty steel, custom castings from distant foundries, or specialized electronic components — require careful planning. For these items:

• Set reorder levels generously (include ample safety stock)
• Monitor stock levels more frequently
• Maintain relationships with multiple suppliers if possible
• Consider keeping a strategic reserve beyond the calculated safety stock

Tips & Best Practices

Tip: Start with conservative (higher) reorder levels during the first three months of ERP usage. As you build confidence in the system and gather actual consumption data, you can fine-tune levels downward to reduce carrying costs.

Warning: Setting a reorder level of zero effectively disables the alert for that item. If you intentionally do not want alerts for an item, leave the reorder level blank or at zero. But do not set it to zero by accident for a critical material.

Tip: For items with multiple vendor options, your safety stock can be lower because you can source from an alternate vendor if the primary one delays. For single-source items, increase safety stock — you have no fallback.

Tip: Align your reorder quantities with vendor minimum order quantities and pricing tiers. If a vendor offers a price break at 1,000 kg, and your calculated reorder quantity is 900 kg, it may be cost-effective to order the full 1,000 kg — provided it does not exceed your max stock level or storage capacity.

Warning: Do not ignore low stock alerts because they happen too frequently. If alerts are firing constantly for many items, it means either your reorder levels are set too high (causing false alarms) or your procurement process is too slow. Fix the root cause: adjust levels or speed up ordering.

Quick Reference