Configuring Inventory Thresholds

Properly configured thresholds are the foundation of effective inventory management. This guide walks you through setting optimal values for your business.

Overview of Thresholds

StockWise uses three key thresholds:

Threshold	Purpose	Impact
Lead Time	Days to receive new inventory	When to reorder
Safety Stock Days	Buffer for unexpected situations	Reorder cushion
Overstock Days	Maximum inventory target	Overstock alerts

Setting Lead Time

What Is Lead Time?

The number of days between placing a purchase order and having the inventory available for sale.

How to Determine Your Lead Time

Consider the complete timeline:

Order placed → Supplier processes → Shipping → Received → Checked → Available

Total Lead Time = Processing + Shipping + Receiving

Recommended Values by Supplier Type

Supplier Type	Typical Lead Time
Local/domestic	3-7 days
Regional	7-14 days
International (air)	14-21 days
International (sea)	30-60 days
Drop ship	1-3 days

Tips for Setting Lead Time

Be realistic: Use actual historical data, not optimistic estimates
Account for variability: If lead time varies, use the longer end
Include all steps: Don't forget receiving and inspection time
Review periodically: Supplier performance can change

Setting Safety Stock Days

What Is Safety Stock?

An extra buffer of inventory to protect against:

Unexpected demand increases
Supplier delays
Quality issues
Seasonal variations

How to Calculate Safety Stock Days

Consider your risk tolerance and product characteristics:

Low Risk Products

Consistent demand
Reliable suppliers
Non-critical items
Recommended: 3-5 days

Medium Risk Products

Some demand variability
Generally reliable suppliers
Important but not critical
Recommended: 5-10 days

High Risk Products

Variable demand
Less reliable suppliers
Critical/high-value items
Recommended: 10-14 days

Factors to Consider

Factor	Lower Safety Stock	Higher Safety Stock
Demand predictability	High	Low
Supplier reliability	High	Low
Product criticality	Low	High
Stockout cost	Low	High
Storage cost	High	Low

Setting Overstock Days

What Is Overstock Threshold?

The maximum days of inventory you want to hold. When inventory exceeds this, it's flagged as overstock.

How to Determine Overstock Days

Consider:

Your typical order cycle
Storage capacity and costs
Cash flow preferences
Product shelf life

Recommended Values

Business Type	Overstock Days
Fast-moving consumer goods	30-45 days
General retail	45-60 days
Specialty/seasonal	60-90 days
B2B/industrial	90-120 days

Warning Signs of Wrong Setting

Too low: Constant overstock warnings, frequent reordering Too high: Never see overstock alerts, capital tied up in excess inventory

Global vs. Per-Product Settings

Global Settings

Set in App Settings, apply to all products by default.

Use for:

Setting baseline values
Products with similar characteristics
Initial configuration

Per-Product Settings

Override global settings on individual variant detail pages.

Use for:

Products with different suppliers (different lead times)
High-value items needing more safety stock
Seasonal products requiring temporary adjustments

Step-by-Step Configuration

Initial Setup

Start with global defaults
- Lead Time: Your most common supplier lead time
- Safety Stock: 5-7 days (conservative starting point)
- Overstock: 45-60 days
Monitor for 2-4 weeks
- Note any stockouts
- Note any excessive overstock alerts
- Track reorder timing accuracy
Adjust based on experience
- Increase safety stock if stockouts occur
- Decrease safety stock if never getting close to stockout
- Adjust overstock threshold based on capital preferences

Fine-Tuning Individual Products

Navigate to the variant detail page
Click "Edit settings"
Adjust values based on product-specific needs
Save and monitor

Common Mistakes

Mistake 1: Underestimating Lead Time

Problem: Setting lead time to 5 days when actual delivery takes 7 Result: Frequent stockouts Solution: Track actual delivery times and use realistic values

Mistake 2: Ignoring Safety Stock

Problem: Setting safety stock to 0 to minimize inventory Result: No buffer for delays or demand spikes Solution: Always maintain some safety buffer

Mistake 3: One-Size-Fits-All

Problem: Using same settings for all products regardless of characteristics Result: Some products stockout while others are overstocked Solution: Customize settings for products with different needs

Mistake 4: Set and Forget

Problem: Never reviewing threshold settings Result: Settings become outdated as business changes Solution: Review settings quarterly or when circumstances change

Seasonal Adjustments

Before Peak Season

Increase safety stock days (add 50-100%)
Consider shorter lead times with expedited shipping
Lower overstock threshold if storage is limited

After Peak Season

Return safety stock to normal levels
Review any excess inventory
Adjust thresholds based on learned patterns

Monitoring Effectiveness

Key Metrics to Track

Metric	What It Tells You
Stockout frequency	Safety stock may be too low
Overstock frequency	Settings may be too conservative
Reorder timing accuracy	Lead time accuracy
Cash tied in inventory	Overstock threshold impact

Review Schedule

Weekly: Check for any stockouts or near-misses
Monthly: Review overstock situations
Quarterly: Comprehensive threshold review
Annually: Major review aligned with business planning

Examples by Business Type

Example 1: Fashion Retailer

Lead Time: 14 days (overseas suppliers)
Safety Stock: 7 days (moderate variability)
Overstock: 45 days (seasonal products)

Example 2: Electronics Store

Lead Time: 5 days (domestic distribution)
Safety Stock: 10 days (high-value items)
Overstock: 60 days (longer product cycles)

Example 3: Drop Ship Business

Lead Time: 2 days (supplier ships directly)
Safety Stock: 3 days (minimal needed)
Overstock: 90 days (no storage costs)