The Formula That Prevents Stockouts (Simple Math, Big Impact)

Hey there,

There's a question that haunts DTC founders.

"How much should we order?"

I've seen smart, successful people completely freeze when they have to answer this question. They stare at their inventory spreadsheet. They look at last month's sales. They think about that one time they ran out of stock and lost a bunch of sales. They think about that other time they ordered too much and it sat in the warehouse for six months.

And then they just... guess.

"I don't know, maybe 500?"

If this is you, I get it. Inventory planning feels like it requires a crystal ball. Like you need to predict the future to get it right.

Here's what 17 years taught me: You don't need to predict the future. You just need a formula.

Here's the formula I use with every single DTC brand I work with:

Reorder Point = (Average Daily Sales x Lead Time) + Safety Stock

That's it.

Let me break it down, because each piece matters:

Average Daily Sales

This is simpler than it sounds. Take your last 30 days of sales for a SKU and divide by 30.

If you sold 300 units last month, your average daily sales is 10 units.

Don't overcomplicate this. You can weight for seasonality later. Just get the baseline number.

Lead Time

This is the total number of days from when you place a purchase order to when that inventory is ready to ship to customers.

This is where most founders underestimate. Lead time isn't just manufacturing time. It's:

Manufacturing time (how long to make it)

Shipping time (how long to get it to you or your 3PL)

Receiving time (how long to check it in and make it available)

If your manufacturer takes 30 days to make it, it takes 20 days on the water, and your 3PL takes 10 days to receive and process it... your lead time is 60 days, not 30.

This is one of the most common mistakes I see. People forget about the shipping and receiving, and then they're constantly running out of stock even though they "ordered on time."

Safety Stock

This is your buffer. Your protection against variability.

Because nothing goes according to plan. Sales spike unexpectedly. Shipments get delayed. Manufacturers have issues. Container ships get stuck in canals.

Safety stock is how much extra inventory you hold to protect against all of that.

A good starting point for most DTC brands: 2-3 weeks of average daily sales.

If you sell 10 units a day, your safety stock might be 140-210 units.

You can get more sophisticated later (calculating based on actual variability in your sales and lead times) but this is a solid starting point.

Let's put it together with a real example:

You sell 10 units per day (average)

Your lead time is 60 days (manufacturing + shipping + receiving)

Your safety stock is 140 units (2 weeks of sales)

Reorder Point = (10 x 60) + 140 = 740 units

When your inventory hits 740 units, place your next order.

Not when you "feel like" you should order. Not when you suddenly realize you're running low. Not when you panic because you're almost out.

When you hit 740 units. That's your trigger. That's your system.

But here’s the question this formula doesn’t answer: should you even be ordering that SKU at all?

That’s where unit economics comes in. Before you calculate how much to order, you need to know if the product is worth ordering in the first place.

Andrew Faris and I are co-hosting a workshop called “Your Best Seller Is Lying to You (And Your Ads Are Making It Worse).”

I walk through the complete contribution margin teardown—not just COGS, but landed cost, fulfillment, returns, customer service load, ad spend per unit. The full picture. Then you can apply the Kill/Fix/Scale framework to decide which products deserve your inventory investment.

Andrew then shows you how to reallocate your growth strategy based on what you learn. Media buying recalibration, creative strategy by margin tier, retention plays for your actually profitable cohorts.

Because the best inventory formula in the world doesn’t help if you’re stocking up on products that lose money.

I know what you're thinking: "What about seasonality? What about new product launches?"

Yes. There's more nuance. There's more sophistication you can add.

But here's what I've learned: most DTC brands aren't struggling because they need more sophisticated formulas. They're struggling because they have NO formula at all.

They're running on gut feel and anxiety.

The simple formula beats gut feel almost every time. And once you have the simple formula working, then you can add complexity.

Walk before you run.

The full inventory planning system (with automatic reorder triggers, days-of-inventory calculations, SKU-level tracking, and everything else) is in Module 4 of the Accelerator.

We don't just explain the formula. We give you the template and show you how to set it up for your business. We help you troubleshoot when things get weird.

Because inventory planning isn't a one-time thing. It's an ongoing system. And having someone in your corner when you're building that system makes all the difference.

This Week's Action

Here's what I want you to do right now:

Calculate the reorder point for your top-selling SKU.

1. Pull your sales for that SKU over the last 30 days

2. Divide by 30 to get average daily sales

3. Add up your true lead time (manufacturing + shipping + receiving)

4. Calculate 2 weeks of average daily sales for safety stock

5. Plug into the formula: (Daily Sales x Lead Time) + Safety Stock

Write that number down.

Now, go check your current inventory for that SKU.

Are you above or below your reorder point?

If you're below it, you might need to order sooner than you thought.

If you're way above it, you might have more cash tied up in inventory than you need.

Either way, you now have information. And information beats guessing every time.

Want to talk through your numbers?

If you run that calculation and something feels off (or you're not sure what it means) come share it in the MOVE Supply Chain Lounge.

It's a free Slack community where DTC founders talk through real supply chain problems. No fluff. Just people figuring this stuff out together.

Post your reorder point calculation. Ask if your lead time sounds right. Get a gut check from someone who's been there.

Sometimes the best thing you can do is just say "does this look normal?" to a room full of people who actually understand the question.

Until next time,

Lara

P.S. If you do this calculation and something surprises you (you realize you should have reordered last week, or you discover you're sitting on way more inventory than you need) reply and tell me. I love these "aha" moments. They're the beginning of everything.