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Module 18 — Inventory, 3PL & Fulfilment
SKU-Level Inventory Management — Reorder Points and Lead Times
12 min · interactive · Advanced
AU operators using 3PLs invariably experience SKU stockouts in their first 6-12 months. The supplier sent 1,000 units; you sold through to 800; you reordered late; suddenly you're out for 5 days. Customer service ticket volume spikes. Reviews drop. Repeat customers leave. Each stockout costs A$3-15k in lost revenue + brand damage. The fix: SKU-level inventory management with reorder points, lead times, and safety stock formulas.
Why SKU-level matters more at scale
When you're dropshipping from AliExpress, inventory management is mostly automated — the supplier holds inventory, you order on-demand. With a 3PL, inventory becomes your problem.
Three structural reasons this matters:
- Lead time is real. Supplier ships from China to your AU 3PL — 14-28 days. You can't reorder on Friday and expect delivery Monday.
- Sales velocity varies. Holiday season, viral campaigns, ad scaling — demand spikes. Without buffer, you stockout.
- Cash-tied-up cost. Holding too much inventory locks up working capital. Holding too little causes stockouts. The right level is calculated, not guessed.
The four key metrics per SKU
For each active SKU, track:
1. Daily velocity. Average units sold per day, calculated on trailing 14-30 days.
- Stable products: trailing 30 days
- Trending/seasonal products: trailing 14 days
2. Lead time. Days from "I order" to "inventory in 3PL ready to ship."
- Sourcing agent in China to AU 3PL: 12-21 days typical
- Supplier in China to US 3PL: 21-35 days typical
- Bulk inventory shipping varies by carrier and season
3. Safety stock. Buffer inventory beyond lead-time coverage.
- For stable products: 14 days of velocity
- For trending products: 21 days of velocity
- For high-uncertainty products (new launches): 28+ days
4. Reorder point. When to place the next order.
- Reorder point = (Lead time × Daily velocity) + Safety stock
The reorder formula
For a typical SKU at 4 units/day daily velocity, 14-day lead time, 14-day safety stock:
- Lead time coverage: 14 × 4 = 56 units
- Safety stock: 14 × 4 = 56 units
- Reorder point: 112 units
When inventory drops to 112 units, place the next order. If you order 200 units (50 days of velocity at the time of order):
- Days 1-14: ship from existing stock (lead time period)
- Day 14: new inventory arrives, starting at 112 + 200 = 312 - daily sales × 14 = 256 units
- Day 14-64: continue selling at 4 units/day, reaching reorder point again at day 50
This pattern continues. The cycle is: order → 14 days lead → restock → consume to reorder point → order again.
Reorder quantity decisions
How much to order each cycle:
Conservative (1.5x reorder point): Order ~170 units
- Pro: lower inventory carrying cost
- Con: more frequent ordering, more shipping cycles
Standard (2x reorder point): Order ~225 units
- Pro: balanced
- Con: standard
Aggressive (3x reorder point): Order ~340 units
- Pro: lower per-unit shipping cost (bulk economies)
- Con: higher carrying cost; risk of saturation if velocity drops
Most AU operators run at 2x reorder point. Adjust based on:
- Cash constraint: smaller orders if cash-tight
- Lead time risk: larger orders if Chinese New Year / Lunar New Year approaching (lead times spike to 35-45 days)
- Velocity uncertainty: smaller orders if testing new SKU
The 90-day inventory dashboard
Build a simple spreadsheet tracking:
| SKU | Stock | Daily velocity | Lead time | Safety stock | Reorder point | Days remaining | Action |
|---|
| Pet collar | 245 | 4 | 14 | 56 | 112 | 61 | Order in 30 days |
| Smart leash | 89 | 3 | 14 | 42 | 84 | 30 | Order this week |
| Night-light | 412 | 6 | 14 | 84 | 168 | 69 | Order in 40 days |
Update weekly. Set alerts when "Days remaining" drops below 30.
The dashboard is the difference between proactive inventory management and reactive stockouts.
Lead time buffer for special periods
Two periods extend Chinese supplier lead times significantly:
Chinese New Year (typically late January-February). Suppliers shut down for 2-4 weeks. Lead times during normal operations are 14-21 days; during CNY they balloon to 35-45 days. AU operators should:
- Place orders 8-10 weeks before CNY (typically late November)
- Increase order quantity 2-3x to bridge the supply gap
Black Friday / Cyber Monday (November-December). Demand spikes 30-200% above baseline. AU operators should:
- Increase reorder quantity 50-100% in October
- Run inventory analysis weekly during the spike
Operators who get caught with low inventory during these periods lose 15-30 days of sales. The cost is structural — you can't recover that revenue.
!Inventory management spreadsheet with SKU-level reorder analysis showing color-coded urgency SKU-level inventory tracking is the discipline that prevents stockouts. 30 minutes weekly. Photo: Unsplash / NeONBRAND.
What kills inventory management
Three operator mistakes:
- No safety stock. Operator orders just enough to cover lead time. Any velocity uptick causes stockout.
- Ignoring trending velocity. Daily velocity is increasing month-over-month, but operator uses 30-day average. Reorder point is too low.
- Cash-driven instead of demand-driven ordering. Operator orders smaller quantities because cash is tight, not because demand is lower. Leads to more frequent stockouts and more shipping cycles (more total cost).
The inventory automation evolution
Three stages of inventory management:
Stage 1: Manual spreadsheet (A$0-30k/month revenue). Excel, Google Sheets. Update weekly.
Stage 2: Inventory app + 3PL integration (A$30-150k/month). Cin7, Stock&Buy, or similar. Auto-calculates reorder points, integrates with Shopify and 3PL.
Stage 3: Custom inventory operations (A