Automatic Reordering System

Overview

The Auto-Reordering System monitors inventory levels and automatically generates purchase orders when stock falls below reorder points. This intelligent system prevents stockouts, optimizes inventory levels, and reduces manual procurement work.

Key Concepts

Reorder Point

The reorder point is the inventory quantity threshold that triggers an automatic reorder. When available stock (on-hand minus reserved) drops to or below this level, the system knows it's time to replenish.

Example:

Product: Premium Widget
Reorder Point: 50 units
Quantity On Hand: 45 units
Quantity Reserved: 0 units
Quantity Available: 45 units

Status: 45 ≤ 50 → NEEDS REORDER

Reorder Quantity

The reorder quantity is the suggested amount to order when restocking. This should bring inventory back to optimal levels while accounting for lead time and demand.

Example:

Product: Premium Widget
Reorder Point: 50 units (minimum safe level)
Reorder Quantity: 200 units (optimal stock level)

When available ≤ 50: Order 200 units
After receipt: Available = 245 units (safe buffer)

Business Logic

The reorder system uses this logic:

quantity_available = quantity_on_hand - quantity_reserved

if (quantity_available <= reorder_point):
  generate_purchase_order(product, reorder_quantity)

Key Points:

Uses available stock (on-hand minus reserved), not just on-hand
Reserved stock is allocated to orders, so it's not available for new sales
Reorder point should account for lead time + safety stock
Reorder quantity should optimize order frequency vs holding costs

Inventory Model

Reorder Fields

Every inventory record has these optional reorder settings:

json

{
  "id": 1,
  "product_id": 101,
  "warehouse_id": 1,
  "quantity_on_hand": 45,
  "quantity_reserved": 10,
  "quantity_available": 35,  // Computed: on_hand - reserved
  "reorder_point": 50,
  "reorder_quantity": 200,
  "last_counted_at": "2025-12-15T10:30:00Z",
  "last_movement_at": "2025-12-17T08:15:00Z"
}

Field Definitions:

reorder_point (integer, nullable): Threshold quantity that triggers reorder
reorder_quantity (integer, nullable): Suggested quantity to order
quantity_available (computed): on_hand - reserved (actual stock available for allocation)

Setting Reorder Points

Manual Configuration:

bash

PUT /api/v1/operations/inventory/reorder-settings

Request:

json

{
  "product_id": 101,
  "warehouse_id": 1,
  "reorder_point": 50,
  "reorder_quantity": 200
}

Business Rules:

Reorder point must be non-negative (>= 0)
Reorder quantity must be positive (> 0)
Reorder quantity should be greater than reorder point (best practice)
Both can be null (disables auto-reorder for that product)

System Validation:

If reorder_quantity ≤ reorder_point, validation warning is issued
System recommends reorder_quantity > reorder_point for optimal inventory management
Example: If reorder_point = 50, reorder_quantity should be at least 51 (typically much higher like 200)

Auto-Reorder Generation

API Endpoint

Endpoint: POST /api/v1/operations/purchase-orders/generate-reorders

Authentication: Required (Bearer token)

Route Name: purchase-orders.generate-reorders

Method: POST (state-changing operation)

Request

No parameters required - system automatically detects products needing reorder:

bash

curl -X POST https://api.example.com/api/v1/operations/purchase-orders/generate-reorders \
  -H "Authorization: Bearer {token}" \
  -H "Content-Type: application/json"

Response

Success (200):

json

{
  "message": "Reorder purchase orders generated successfully",
  "data": [
    {
      "id": 78,
      "order_number": "PO-202512-00078",
      "status": "draft",
      "supplier": {
        "id": 12,
        "name": "Acme Supplies Inc",
        "email": "orders@acmesupplies.com"
      },
      "order_date": "2025-12-17",
      "expected_delivery_date": "2025-12-24",
      "total_amount": 3100.00,
      "currency": "USD",
      "line_items": [
        {
          "id": 234,
          "product_id": 101,
          "product_sku": "WIDGET-001",
          "product_name": "Premium Widget",
          "quantity_ordered": 200,
          "unit_price": 15.50,
          "line_total": 3100.00,
          "warehouse_id": 1
        }
      ],
      "internal_notes": "Auto-generated reorder - stock below reorder point"
    }
  ],
  "count": 1
}

No Reorders Needed (200):

json

{
  "message": "Reorder purchase orders generated successfully",
  "data": [],
  "count": 0
}

How It Works

Detection Algorithm

The system scans all inventory records to find products needing reorder:

sql

SELECT * FROM operations_inventory
WHERE reorder_point IS NOT NULL
AND (quantity_on_hand - quantity_reserved) <= reorder_point

Conditions for Auto-Reorder:

Product has reorder_point configured (not null)
Available stock ≤ reorder_point
Product has preferred supplier configured
Product is active (not discontinued)

PO Generation Logic

Current Implementation Note: The auto-reorder generation is currently a placeholder returning an empty collection. Full implementation follows this workflow:

Step 1: Find products needing reorder

Query all inventory records with configured reorder points
Filter where: (quantity_on_hand - quantity_reserved) <= reorder_point
Load related product and preferred supplier information

Step 2: Group by supplier

Organize low-stock products by their preferred supplier
This allows creating one PO per supplier with multiple line items
More efficient than separate POs for each product

Step 3: Create PO for each supplier

For each supplier group:

Create new purchase order with:
- Supplier ID from the grouped products
- Status: draft (requires approval before sending)
- Order date: current date
- Expected delivery date: current date + supplier's lead time
- Internal notes: "Auto-generated reorder - stock below reorder point"

Step 4: Add line items

For each product in the supplier group:

Create PO line item with:
- Product ID
- Quantity ordered: uses reorder_quantity (or calculates optimal quantity if not set)
- Unit price: uses last purchase price or product cost price
- Warehouse ID: destination warehouse for the stock

Return value:

Collection of generated purchase orders in draft status
Ready for review, approval, and sending

Supplier Selection

Preferred Supplier (Product-level configuration):

Each product can have a designated preferred supplier
Auto-reorders use preferred supplier automatically
Ensures consistent quality and pricing

If No Preferred Supplier:

Use last supplier from which product was purchased
Or use default supplier for product category
Or require manual supplier selection (PO stays in draft)

Warehouse Routing

Single Warehouse:

Product has inventory at Warehouse A only
→ Reorder sends to Warehouse A

Multi-Warehouse:

Product has inventory at multiple warehouses:
- Warehouse A: available = 20, reorder_point = 50 → NEEDS REORDER
- Warehouse B: available = 100, reorder_point = 50 → OK

Generate PO line item for Warehouse A only

Each warehouse's inventory is tracked independently.

Reorder Calculations

Determining Reorder Point

Formula:

reorder_point = (average_daily_usage × lead_time_days) + safety_stock

Example:

Product: Premium Widget
Average Daily Sales: 5 units/day
Supplier Lead Time: 7 days
Safety Stock Buffer: 15 units

Reorder Point = (5 × 7) + 15 = 50 units

Rationale: When you hit 50 units, you have enough to last through the 7-day lead time (35 units) plus a 15-unit buffer for demand variance.

Determining Reorder Quantity

Economic Order Quantity (EOQ) Formula:

EOQ = √((2 × annual_demand × order_cost) / holding_cost_per_unit)

Simplified Approach:

reorder_quantity = average_monthly_usage × reorder_frequency_months

Example:

Product: Premium Widget
Average Monthly Sales: 150 units
Desired Reorder Frequency: 1.5 months (6 weeks)

Reorder Quantity = 150 × 1.5 = 225 units
Round to case pack: 200 units

Factors to Consider:

Order frequency (minimize handling overhead)
Storage capacity (can you hold the quantity?)
Perishability (don't over-order expiring goods)
Supplier MOQs (minimum order quantities)
Volume discounts (price breaks at certain quantities)

Suggested Quantity Calculation

The system calculates suggested reorder quantities using this logic:

Step 1: Check if reorder is needed

If available stock is above reorder point, no suggestion provided
Returns null (no reorder needed)

Step 2: Use configured reorder quantity

If reorder_quantity is configured (not null)
Return that specific value
This is the preferred method (explicitly defined by user)

Step 3: Calculate deficit

If reorder_quantity is not configured
Calculate: deficit = reorder_point - quantity_available
Return the deficit amount (quantity needed to reach reorder point)

Behavior Summary:

If reorder_quantity is configured → use that value
If not configured → suggest quantity to reach reorder point
Ensures you don't order too little (always returns at least the deficit)

Workflow Integration

Manual Trigger

Use Case: Procurement manager reviews inventory and triggers reorder generation manually

Steps:

Navigate to Inventory → Reorder Report
Review products below reorder point
Click "Generate Reorders" button
System creates draft POs
Review, modify if needed, approve, and send

Scheduled Automation

Use Case: System runs nightly to auto-generate reorders

Workflow:

Scheduler executes at configured time (e.g., 2:00 AM)
Calls the purchase order service to generate reorders
Creates draft POs for all products below reorder points
Optionally auto-approves POs below configured threshold
Optionally auto-sends approved POs to suppliers

Auto-Approval Logic:

Check each generated PO's total amount
If below configured auto-approval limit (e.g., $1,000)
Automatically approve and send the PO
If above limit, leave in draft for manual review

Configuration Options:

Schedule frequency (daily, hourly, etc.)
Execution time (e.g., 2:00 AM when traffic is low)
Auto-approval threshold amount
Auto-send after approval (yes/no)
Email notifications for generated orders

Event-Driven

Use Case: Trigger reorder immediately when inventory drops below threshold

Workflow:

System listens for stock adjustment events
When inventory is updated (sale, transfer, adjustment)
Event handler checks if inventory now needs reorder
If available stock ≤ reorder point, triggers PO generation
Background job creates the purchase order

Advantages:

Real-time response to stock changes
Immediate reorder for critical items
Prevents stockouts during high-demand periods
No waiting for scheduled job

Considerations:

May generate frequent small orders during busy periods
Consider implementing cooldown period between reorders
May want to batch orders if multiple products need reordering
Balance immediacy with order efficiency

Monitoring & Reporting

Reorder Report

Endpoint: GET /api/v1/operations/inventory/reorder-report

Response:

json

{
  "data": [
    {
      "product_id": 101,
      "product_sku": "WIDGET-001",
      "product_name": "Premium Widget",
      "warehouse_id": 1,
      "warehouse_name": "Main Warehouse",
      "quantity_available": 35,
      "reorder_point": 50,
      "reorder_quantity": 200,
      "deficit": 15,
      "suggested_order_quantity": 200,
      "preferred_supplier": {
        "id": 12,
        "name": "Acme Supplies Inc"
      },
      "last_purchase_date": "2025-11-15",
      "average_daily_usage": 5.2,
      "days_until_stockout": 6
    }
  ],
  "summary": {
    "total_products_needing_reorder": 1,
    "total_suggested_order_value": 3100.00,
    "by_warehouse": {
      "Main Warehouse": 1
    },
    "by_supplier": {
      "Acme Supplies Inc": 1
    }
  }
}

Use Cases:

Daily review of products needing reorder
Planning procurement budget
Identifying supplier concentration
Forecasting warehouse capacity needs

Low Stock Alerts

Endpoint: GET /api/v1/operations/inventory/low-stock

Response:

json

{
  "data": [
    {
      "product_id": 101,
      "sku": "WIDGET-001",
      "name": "Premium Widget",
      "warehouse_id": 1,
      "quantity_available": 35,
      "reorder_point": 50,
      "status": "low_stock",
      "urgency": "medium"
    }
  ]
}

Urgency Levels:

critical: Available ≤ 25% of reorder point
high: Available ≤ 50% of reorder point
medium: Available ≤ 75% of reorder point
low: Available ≤ reorder point

Best Practices

Setting Reorder Points

1. Calculate Based on Data

Don't guess - use historical sales data
Account for lead time variability
Include safety stock for demand spikes
Review and adjust quarterly

2. Consider Product Characteristics

Fast-Moving Items (high turnover):
  Higher reorder point, frequent orders
  Example: reorder_point = 100, reorder_quantity = 500

Slow-Moving Items (low turnover):
  Lower reorder point, larger quantities per order
  Example: reorder_point = 10, reorder_quantity = 50

Seasonal Items:
  Adjust reorder points before peak season
  Reduce after season ends

3. Account for Lead Time

Short Lead Time (2-3 days):
  Lower reorder point acceptable
  Example: reorder_point = 20

Long Lead Time (30+ days):
  Higher reorder point required
  Example: reorder_point = 200

Optimizing Reorder Quantities

1. Balance Order Frequency vs Holding Costs

Order Too Often:
  + Lower inventory holding costs
  - Higher order processing costs
  - More staff time spent on receiving

Order Too Infrequently:
  + Lower order processing costs
  - Higher inventory holding costs
  - Risk of excess/obsolete stock

2. Leverage Supplier Terms

Volume Discounts:
  If 10% discount at 500 units → consider increasing reorder quantity

Free Shipping Threshold:
  If free shipping at $2000 → bundle products to reach threshold

MOQ (Minimum Order Quantity):
  Supplier requires 100 unit minimum → set reorder_quantity ≥ 100

3. Case Pack Optimization

Supplier ships in case packs of 24 units
Calculated reorder quantity: 225 units

Round up: 225 ÷ 24 = 9.375 → 10 cases = 240 units
Better than: 225 units (would need 9 cases + 9 loose units)

Automation Configuration

1. Start Conservative

Initial Setup:
  Manual approval required for all auto-generated POs
  Review for 2-4 weeks
  Adjust reorder settings based on results

2. Gradual Automation

Phase 1: Auto-generate, manual approve (draft → pending)
Phase 2: Auto-approve low-value POs (<$500)
Phase 3: Auto-approve + auto-send for trusted suppliers
Phase 4: Full automation with exception alerts

3. Set Safety Limits

Configure system-wide safety limits to prevent issues:

auto_approve_limit: Maximum dollar amount for automatic approval (e.g., $1,000)
max_reorder_quantity: Sanity check to prevent ordering excessive quantities (e.g., 10,000 units)
min_days_between_orders: Cooldown period to prevent excessive ordering (e.g., 7 days)
require_approval_for_new_suppliers: Force manual approval for orders from new suppliers (true/false)

Monitoring & Maintenance

1. Daily Checks

Review reorder report
Check for anomalies (huge quantities, wrong suppliers)
Monitor auto-generated POs awaiting approval

2. Weekly Reviews

Analyze stockouts (should be rare)
Identify products frequently below reorder point
Adjust reorder points as needed

3. Monthly Analysis

Calculate inventory turnover
Identify slow-moving stock
Review supplier performance
Optimize reorder quantities

4. Quarterly Updates

Recalculate reorder points based on recent sales
Account for seasonality
Update supplier lead times
Review and adjust automation rules

Troubleshooting

No POs Generated

Symptom: Generate-reorders returns empty array

Causes & Solutions:

No reorder points configured

sql

SELECT COUNT(*) FROM operations_inventory WHERE reorder_point IS NOT NULL;

Solution: Configure reorder points for products

All stock levels above reorder points

sql

SELECT * FROM operations_inventory
WHERE reorder_point IS NOT NULL
AND (quantity_on_hand - quantity_reserved) <= reorder_point;

Solution: This is good! No action needed

Products missing preferred supplier
- Check product configuration
- Assign preferred suppliers
- System may skip products without suppliers

Excessive Reorders

Symptom: Too many POs generated, ordering too frequently

Causes & Solutions:

Reorder point too high
- Recalculate based on actual lead time
- Reduce safety stock buffer
- Monitor for 2 weeks before adjusting
Reorder quantity too small
- Increase reorder_quantity
- Consider supplier MOQs and case packs
- Balance order frequency vs holding costs
System running too frequently
- Change from hourly to daily schedule
- Implement minimum days between orders check
- Add cooldown period after order generation

Stockouts Despite Auto-Reorder

Symptom: Products going out of stock even with reorder system

Root Causes:

Reorder point too low

Issue: Lead time increased but reorder point not updated
Solution: Recalculate with current lead time

Demand spike

Issue: Sales exceeded historical average
Solution: Increase safety stock buffer

Supplier delays

Issue: PO sent but goods delayed
Solution: Find backup supplier, increase reorder point

Reserved stock not accounted

Issue: High reserved quantities eating into available stock
Solution: Reorder point should account for typical reservation levels

Wrong Quantities Ordered

Symptom: POs generated with incorrect quantities

Causes:

Reorder quantity not configured
- System falls back to deficit calculation: deficit = reorder_point - quantity_available
- May result in ordering too little
- Solution: Explicitly set reorder_quantity for optimal stock replenishment
Stale configuration
- Reorder quantity from months ago
- Demand patterns changed
- Solution: Review and update quarterly

Integration Examples

Display products needing reorder on your dashboard:

API Call:

bash

GET /api/v1/operations/inventory/reorder-report
Authorization: Bearer {token}

Display Metrics:

Total products needing reorder (count of items in response)
Total estimated order value (from summary.total_suggested_order_value)
Urgent products (filter items where days_until_stockout < 3)
Products grouped by warehouse or supplier

Visualization Ideas:

Chart showing low stock trends over time
Table of products sorted by urgency
Alerts for critical stock levels (< 25% of reorder point)

Email Notifications

Send daily digest of reorder needs to procurement team:

Email Content:

Subject: "Daily Reorder Report - {count} products need attention"
Number of products below reorder point
Total estimated order value
Link to generate reorders action
List of urgent items (stockout within 3 days)

Trigger:

Scheduled daily at specific time (e.g., 8:00 AM)
Only send if products need reordering
Include actionable links to review and approve

Slack Integration

Post alerts for critical stock levels to team channel:

Alert Triggers:

Stock drops below 25% of reorder point (critical)
Stock drops below 50% of reorder point (high urgency)
New auto-generated PO awaiting approval

Alert Content:

Product name and SKU
Current available quantity
Reorder point threshold
Days until estimated stockout
Link to view product or PO

Delivery:

Post to procurement team channel
Mention specific team members for critical items
Include quick action buttons (approve PO, view details)

Purchase Order Workflow - Complete PO lifecycle
Receiving Goods - Process incoming shipments
Inventory Management - Stock control
Supplier Management - Supplier configuration

Summary

The Auto-Reordering System prevents stockouts through intelligent monitoring and automated purchase order generation. Key takeaways:

Reorder Point = when to order (threshold quantity)
Reorder Quantity = how much to order (optimal replenishment)
Available Stock = on_hand - reserved (accounts for allocated inventory)
Automation Levels = start manual, gradually increase automation
Regular Review = adjust settings based on actual performance

Properly configured, the auto-reorder system reduces manual work, prevents stockouts, and optimizes inventory levels automatically.

Automatic Reordering System ​

Overview ​

Key Concepts ​

Reorder Point ​

Reorder Quantity ​

Business Logic ​

Inventory Model ​

Reorder Fields ​

Setting Reorder Points ​

Auto-Reorder Generation ​

API Endpoint ​

Request ​

Response ​

How It Works ​

Detection Algorithm ​

PO Generation Logic ​

Supplier Selection ​

Warehouse Routing ​

Reorder Calculations ​

Determining Reorder Point ​

Determining Reorder Quantity ​

Suggested Quantity Calculation ​

Workflow Integration ​

Manual Trigger ​

Scheduled Automation ​

Event-Driven ​

Monitoring & Reporting ​

Reorder Report ​

Low Stock Alerts ​

Best Practices ​

Setting Reorder Points ​

Optimizing Reorder Quantities ​

Automation Configuration ​

Monitoring & Maintenance ​

Troubleshooting ​

No POs Generated ​

Excessive Reorders ​

Stockouts Despite Auto-Reorder ​

Wrong Quantities Ordered ​

Integration Examples ​

Dashboard Widget ​

Email Notifications ​

Slack Integration ​

Related Guides ​

Summary ​

Automatic Reordering System

Overview

Key Concepts

Reorder Point

Reorder Quantity

Business Logic

Inventory Model

Reorder Fields

Setting Reorder Points

Auto-Reorder Generation

API Endpoint

Request

Response

How It Works

Detection Algorithm

PO Generation Logic

Supplier Selection

Warehouse Routing

Reorder Calculations

Determining Reorder Point

Determining Reorder Quantity

Suggested Quantity Calculation

Workflow Integration

Manual Trigger

Scheduled Automation

Event-Driven

Monitoring & Reporting

Reorder Report

Low Stock Alerts

Best Practices

Setting Reorder Points

Optimizing Reorder Quantities

Automation Configuration

Monitoring & Maintenance

Troubleshooting

No POs Generated

Excessive Reorders

Stockouts Despite Auto-Reorder

Wrong Quantities Ordered

Integration Examples

Dashboard Widget

Email Notifications

Slack Integration

Related Guides

Summary