Out of fence posts on the first sunny weekend
Every spring it happens. The weather turns, landscapers and homeowners come in for paving, sleepers, fence panels and posts, and the branch runs out of the popular sizes within a fortnight. The supplier's lead time has stretched because every merchant is ordering at once. Meanwhile, in the autumn, the yard is still full of the paving you bought too late, taking up space you need for winter lines.
The reorder levels in the system are the same in March as they are in November. Nobody has had time to change them, so buyers override the suggestions by gut feel.
Why fixed reorder levels fail
A fixed minimum and maximum works for products with steady demand. A lot of what a builders merchant sells is not steady.
- Landscaping, fencing and decking peak in spring and summer.
- Some roofing, drainage and heating lines move with the weather.
- Insulation and some internal products follow their own cycles and schemes.
- Each branch has a different mix of trade and retail customers, so seasons hit differently.
- Supplier lead times lengthen exactly when demand peaks.
When the system's suggestions are wrong for half the year, buyers stop using them, and ordering becomes a matter of memory.
What the wrong levels cost
Lost sales at the peak, when customers go wherever has stock. Cash tied up in the wrong stock off-peak. Yard space filled with slow lines. And buyers spending hours each week second-guessing the system instead of negotiating with suppliers.
Reorder suggestions that follow the season
- Sales history is read from your merchant system by product and branch, going back as far as the data is reliable.
- Each line's seasonal pattern is worked out from its own history, and lines with too little history borrow the pattern of similar products.
- Supplier lead times are tracked from actual purchase order and receipt dates, so the system knows when they stretch.
- Weekly suggestions account for season, lead time, minimum order quantities and pack sizes, and what is already on order.
- Buyers see each suggestion with the reason, adjust it, and approve. Approved orders go into your merchant system as purchase orders.
- Lines where buyers repeatedly override the suggestion are flagged, so the settings can be improved.
| Period | Fixed reorder level | Seasonal suggestion |
|---|---|---|
| Late winter | Same as always | Builds stock ahead of spring lead times |
| Spring peak | Runs out | Holds higher stock on fast sizes |
| Late summer | Keeps reordering | Tapers off before demand falls |
| Winter | Holds slow stock | Keeps cover low on seasonal lines |
The buyer stays in charge. Weather, local jobs and supplier deals are things a buyer knows and a model does not, and the tool is built to be overridden.
A buyer's week afterwards
Buyers start with a list of suggestions that make sense for the time of year, and spend their time on the exceptions. Seasonal lines are ordered ahead of the rush. The yard carries less of what won't sell until next year. Overrides are recorded, so the next season's suggestions learn from this one.
Signs your reorder levels are stuck
- Reorder levels haven't been changed in years.
- Popular seasonal lines run out at the start of every peak.
- Buyers ignore the system's suggestions.
- The yard is full of summer lines in winter.
- Supplier lead times are not tracked from actual receipts.