Hey there,

I need to ask you something uncomfortable.

How do you decide when to reorder inventory?

If you're like most founders I work with, the honest answer is one of these:

"Looks low. Order more."

Or: "Stocked out. Order double."

Both are bleeding you dry. And neither is a strategy.

I recorded a YouTube video breaking this down in detail. If you’d rather watch than read, start there. I explain why many DTC founders aren’t actually cash poor. They’re inventory rich. I walk through where the cash gets trapped, the inventory mistakes that cause it, and how to find hidden cash in your stock.

If you'd rather read, keep going. Same concepts, different format.

Let me tell you about a brand I worked with last year.

They were doing $1.5M in revenue. Growing fast. Hero SKU was crushing it. Then they stocked out for three weeks. Three weeks of turning customers away. Three weeks of watching competitors scoop up their audience. Cost them about $20K in lost sales.

So what did they do? What any panicked founder would do.

They ordered six months of inventory. "Never again," they said.

Six months later? Cash crisis. That panic order locked up $150K in inventory they couldn't move fast enough. They had to discount 40% just to free up cash for marketing.

The stockout cost them $20K. The panic order cost them $150K.

Neither had to happen.

Here's what they were missing: a reorder point.

A reorder point isn't complicated. It's the inventory level that triggers your next order. Hit this number, place the order. Simple. Mathematical. Unemotional.

But to calculate it, you need four inputs. Most founders have never thought about any of them.

1. Sell-through rate (daily units). How many units do you sell per day? Not your best day. Not your worst. Your average. If you sell 1,500 units of a SKU per month, your daily rate is 50 units.

2. Lead time (days). How long from placing an order until it's on your shelf ready to ship? Include everything: production time, shipping time, customs (if applicable), and receiving time. For most DTC brands sourcing overseas, this is 45-90 days. Domestic is typically 7-21 days.

3. Cash position. Can you actually afford the order you're calculating? This is the input most founders ignore until they can't. Your reorder point formula might tell you to order 5,000 units, but if you only have cash for 2,000, you need to know that before you commit.

4. Demand forecast (confidence level). How confident are you in that sell-through rate? Is demand steady, or does it spike with promos? Are you launching a marketing campaign next month that will change everything? Your safety stock depends on your forecast accuracy.

Reorder Point = (Daily Sell-Through Rate × Lead Time) + Safety Stock

Let me run an example.

Say you're selling 50 units per day. Your lead time is 45 days. You want 10 days of safety stock (500 units) because demand is pretty steady but you've had a few surprise spikes.

Reorder Point = (50 × 45) + 500 = 2,750 units

When your inventory hits 2,750 units, you place your order. Not when it "looks low." Not when you stockout. At 2,750. Every time.

That's it. That's the system.

No guessing. No gut feel. No panic at 2am when you realize you're about to run out.

Here's the thing: reorder points are one piece of a bigger puzzle.

Post-CNY inventory has landed. The wire transfers have cleared. Your 3PL bill is climbing. And somehow you're "fully stocked" but can't afford to run ads at the level you want. Sound familiar?

This isn't a cash problem, it's an inventory timing problem. Every PO you place is a loan you gave yourself, and the interest rate is opportunity cost.

I'm running a live workshop this month that reframes how you think about inventory: not as an asset to celebrate, but as cash that hasn't come back yet.

What you'll learn:

→ Why "months of supply" is meaningless without velocity context—and what to measure instead

→ How to calculate your Cash Conversion Cycle by SKU (and what "good" looks like for DTC)

→ A reorder timing system that stops the bleeding—based on actual data, not gut feel or fear

→ Case study: How one brand freed up $120K in working capital without selling anything

This is for founders who feel trapped by their own inventory. You'll leave understanding where your cash is stuck, when it comes back, and how to stop starving the business while "fully stocked."

If you read last week's newsletter about Cash Conversion Cycle, you know that every extra day your cash is trapped in inventory is a day you can't use it for growth.

Your reorder point directly impacts your CCC.

Order too early? Cash is locked up longer. Order too late? You stockout, panic order double, and now cash is locked up even longer.

The reorder point is the bridge between "I think I need inventory" and "I know exactly when to order."

Your reorder point isn't static. It changes when:

Your sell-through rate changes (seasonality, marketing pushes, market shifts)

Your lead time changes (new supplier, shipping delays, customs issues)

Your risk tolerance changes (more cash = more safety stock; tighter cash = less)

The founders who get this right review their reorder points monthly. The ones who set it once and forget it? They're the ones calling me in a panic.

Calculate reorder points for your top 5 SKUs. Just 5. Takes about 20 minutes.

Here's what you need:

→ Last 90 days of sales data for each SKU

→ Your actual lead time (be honest, add a buffer)

→ How much safety stock you're comfortable holding

Reply with what you find. I read every response, and I'll tell you if your numbers look off.

This week in the Supply Chain Founders community, we're doing a reorder point challenge. Post your top SKU and your calculated reorder point, and I'll give you feedback. Several founders have already shared theirs, and the discussion about safety stock levels has been incredible.

One founder discovered she'd been holding 60 days of safety stock on a product with a 14-day lead time. She freed up $23K just by right-sizing her reorder point.

The community is free. If you're doing DTC and want to talk supply chain with people who get it, this is the place.

→ [Join the Supply Chain Founders Community on Circle]

Next week: How one brand freed $120K without selling anything extra. (Hint: it starts with understanding where your inventory is actually sitting.)

Until next time,

Lara

P.S. Quick gut check: If someone asked you right now "when should I reorder SKU #1?" could you give them a number? Not "when it looks low." An actual number. If not, that's your homework.

P.P.S. Remember that founder with the $20K stockout? After we implemented reorder points for all her top SKUs, she went 8 months without a single stockout. Same products. Same lead times. Different system.