Overstocking is a costly mistake for businesses. It ties up cash, increases storage costs, and often leads to heavy discounts or write-offs. The solution? Automating your reordering process. Here's what you need to know:

• What causes overstock? Poor demand forecasting, rigid restocking schedules, and outdated manual tracking systems.
• Why automate? Automation reduces inventory holding costs by up to 20% and ensures stock is replenished only when needed.
• Key steps to prevent overstock:
  1. Use Shopify's inventory tracking features to maintain accurate stock levels.
  2. Calculate reorder points (ROP) using sales data, lead times, and safety stock.
  3. Leverage AI-powered tools for demand forecasting and automated purchase orders.
  4. Regularly review supplier performance and adjust for seasonal trends.

What Overstock Is and What Causes It

Overstock, often referred to as "surplus stock", happens when businesses purchase more products than they can sell. Unlike intentionally planned safety stock, overstock is accidental - and it’s becoming increasingly expensive. On average, businesses are now holding about $1.40 in inventory for every dollar in sales. This suggests that many retailers are carrying far more stock than they actually need.

What leads to overstock? A few common factors include poor demand forecasting due to limited customer data, the fear of running out of stock (which prompts overbuying), and long lead times that force businesses to order far in advance. Another frequent issue is sticking to rigid restocking schedules - like ordering every Monday - without taking actual sales trends into account. This can result in excess inventory during slower periods. All of these factors combine to disrupt cash flow and reduce operational efficiency.

How Overstock Affects Your Business

Excess inventory ties up cash that could be used for other priorities, like marketing campaigns, launching new products, or expanding your business. Kameron Jenkins from Shopify breaks it down:

Until products sell, that investment will not be recovered. This begins to snowball as store owners lack the funds needed to replace overstock goods with new products.

But it’s not just about frozen capital. Overstock also comes with hefty carrying costs - think storage fees, labor, insurance, and depreciation. These expenses can add up to roughly 30% of your inventory’s total value. And when items sit unsold for too long, especially if they’re perishable or tied to fleeting trends, you might have to slash prices or even write them off entirely. These financial consequences often trace back to preventable inventory mistakes.

Common Errors That Create Overstock

To avoid these costly consequences, it's important to understand the common mistakes that lead to overstock. For example, many Shopify brands struggle with incomplete customer data. Without distinguishing between new and repeat buyers, they lack the insights needed to make informed purchasing decisions. This often results in over-ordering to avoid stockouts.

Another issue is relying on outdated manual tracking systems, which can’t keep up with fast-changing sales patterns. In fact, 58% of brands report that their inventory accuracy is below 80%. Lastly, some businesses focus too heavily on marketing to move products without basing their buying decisions on data. Failing to adjust for seasonal trends can leave you stuck with unsold inventory that eventually needs to be sold at a loss.

Setting Up Inventory Tracking in Shopify

Keeping your Shopify inventory accurate is crucial for automated reordering to work smoothly. Without proper tracking, your system might miscalculate when to reorder or assume you have more stock than you actually do. As noted in Shopify's Help Center, "Accurate inventory on your Shopify store helps customers place orders. Before you can view or adjust inventory levels for a product, you need to set up inventory tracking for that product".

The good news? Setting up inventory tracking only takes a few minutes per product. Once it's enabled, Shopify keeps an adjustment history for up to 180 days, giving you a reliable audit trail if discrepancies arise. This setup ensures your automated processes rely on clean, real-time data. After enabling tracking, you can fine-tune inventory settings for each product.

Turning On Inventory Tracking for Your Products

Here’s how to get started: Go to Products in your Shopify admin dashboard, select the product or variant you want to track, scroll to the Inventory section, toggle on "Track quantity", input the number of units available, and save. If you're using the mobile app, tap on the product, navigate to Inventory > Edit, toggle on Track quantity, enter your stock count, and save.

For businesses with multiple warehouses or retail locations, Shopify’s location filter on the Inventory page allows you to view and manage stock for each site. It’s helpful to categorize inventory into three groups:

• On hand: Total physical stock.
• Available: Units ready for sale.
• Unavailable: Items set aside for safety stock, damaged goods, or quality checks.

This categorization prevents errors, like reordering unnecessary amounts or selling items that aren’t ready to ship.

Once tracking is in place, you can take it a step further by grouping products based on sales patterns.

Grouping Products by Sales Speed

Not all products sell at the same pace, so your reorder rules should reflect those differences. Shopify's ABC analysis report is a great tool for this - it grades product variants (A, B, or C) based on their revenue contribution over the past 28 days. Focus your automation efforts on "A" grade products, as these are your top earners.

Another helpful tool is the Days of inventory remaining report, which estimates how long your current stock will last based on average sales rates. This report is invaluable for identifying fast-moving items that need frequent reordering and slower-moving products that could lead to overstock. As Shopify explains, "The Days of inventory remaining report... is also a great tool to help you identify slow-moving products so you can make better merchandising and reordering decisions".

Setting Reorder Points for Automated Restocking

Once you've grouped products by sales speed, the next step is figuring out the reorder point (ROP). The ROP is the inventory level that signals it’s time to place a new order. Getting this right is key - it helps you avoid stockouts while also preventing excess inventory that ties up cash.

Here’s the formula for calculating your reorder point:

(Average Daily Sales × Lead Time in Days) + Safety Stock

Let’s break it down:

• Average daily sales measure how quickly you sell a product.
• Lead time is the number of days it takes for an order to arrive after placing it.
• Safety stock is your extra cushion to handle unexpected demand or supplier delays.

Make sure your time units match - if sales are measured daily, your lead time must also be in days. For example, if you sell 5 chairs per day, have a lead time of 35 days, and hold 15 chairs as safety stock, your ROP is:
(5 × 35) + 15 = 190 units.
When your inventory hits 190 units, it’s time to reorder. As Sentao Miao, Assistant Professor of Operations Management at McGill University, puts it:

"Setting a reorder point is a simple but effective way to keep inventory at a safe level. With a carefully determined reorder point, retailers can not only lower the risk of stockout, but also reduce inventory holding costs."

Calculating Your Reorder Points

To calculate safety stock, use this formula:
(Max Daily Sales × Max Lead Time) – (Average Daily Sales × Average Lead Time)

This accounts for worst-case scenarios, like sudden demand spikes or supplier delays. For instance, if your average daily sales are 15 units with a 10-day lead time, but demand can jump to 25 units and delays can stretch to 15 days, your safety stock would be:
(25 × 15) – (15 × 10) = 225 units.

Next, calculate your lead time demand - how many units you’ll sell during the lead time - by multiplying your average daily sales by the lead time in days. Add this to your safety stock to get the final reorder point. Be sure to consider non-working days. For example, if your supplier doesn’t ship on weekends and you place an order on Thursday with a three-day lead time, you might not receive it until Tuesday. Accounting for these gaps prevents errors.

Adjust for seasonal trends to avoid overstocking during slower periods. A surfboard retailer, for example, might set higher reorder points in summer when sales spike from 10 to 30 units daily, then lower them in winter to avoid unnecessary storage costs. Revisit your reorder points whenever sales patterns or lead times change significantly.

Once you’ve nailed down your ROPs, integrate them into Shopify to automate restocking.

Saving Reorder Points in Shopify

Accurate ROP values are essential for automating restocking. While Shopify doesn’t have a built-in field for reorder points, you can use metafields to store this data. Here’s how:

1. Go to Settings > Custom Data > Products in your Shopify admin.
2. Create a new metafield definition called "Reorder Point" and set the content type to Integer.
3. Save the definition, then enter the calculated ROP for each product in the metafields section.

For advanced automation, tools like Forstock can handle this process for you. Forstock calculates and tracks ROPs based on historical sales, supplier lead times, and seasonal patterns. It monitors inventory in real time and generates purchase orders automatically when stock hits the reorder point. This eliminates the need for manual spreadsheets and reduces the chance of human error - a game-changer for Shopify stores managing hundreds of SKUs across multiple locations.

You can also set up alerts using Shopify Flow. Create workflows that trigger actions when inventory hits the reorder point. For example, you might:

• Send a Slack notification to your purchasing manager.
• Tag the product for review.
• Automatically generate a draft purchase order.

Oak + Fort, for example, saved 50 hours per week and slashed operating costs by 47% by streamlining their inventory management and automating these workflows.

Automating Purchase Orders and Supplier Communication

Once you've established your reorder points, the next logical step is to move away from manually creating purchase orders (POs). Shopify’s built-in tools allow for manual creation and tracking of POs, but automating this process - where POs are triggered by stock levels - usually requires third-party tools like Forstock. Manual PO creation can take 2–3 days, but automation cuts that down to just a few hours.

To ensure smooth automation, verify and clean all supplier data, including contact details, lead times, minimum order quantities (MOQs), and pricing. Setting SKU-specific reorder thresholds also helps prevent errors and overstocking. It’s essential to confirm supplier data accuracy before fully automating to avoid costly mistakes.

Creating Automated Purchase Orders

Automated systems monitor inventory levels in real time and generate purchase orders the moment stock hits its reorder point. These systems pull data directly from Shopify, creating POs that are ready for review and email.

For example, Alexander, a Supply Chain Manager at FashionCo, reported saving over 10 hours each week after a quick 2-minute setup. Similarly, HomeGoods managed to cut excess inventory by 45%, freeing up $150,000 in working capital by implementing automated PO creation.

To streamline the process further, group low-stock SKUs into a single PO per vendor to meet MOQs and simplify shipping logistics. Use three-way matching - comparing the PO, goods receipt, and supplier invoice - to reduce errors and avoid overpayments. While leading organizations process POs in under five hours, others can take more than 48 hours, highlighting the efficiency gap automation can bridge.

Automating Supplier Notifications

Once your POs are automated, the next step is to ensure suppliers receive orders without delay. Automated notifications send complete order details - like SKUs, quantities, and delivery dates - immediately after a PO is generated. Keeping supplier data current, including contact details and lead times, ensures every automated reorder is accurate. To maintain accountability, consider requiring suppliers to acknowledge or reject POs within 24 hours, creating a clear audit trail and minimizing delays.

AstraZeneca provides a strong example of success in this area. By automating procure-to-pay workflows across 11 markets, they reduced PO-to-approval times from 3 days to 1.5 days and cut invoice approval times from 60 days to just 4.5 days. This also gave them instant visibility into transactions.

To avoid duplicate orders, update incoming inventory levels as soon as a PO is issued. Review your automation rules regularly to account for changes in supplier lead times, demand, and sales trends.

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Using Demand Forecasting for Better Reorder Decisions

Automated purchase orders are only as effective as the quality of the data driving them. Relying on outdated averages or gut instincts often leads to overstocked shelves or wasted resources. Demand forecasting uses AI to dig into historical data, seasonal trends, and market shifts, helping you reorder the right amount of inventory at just the right time.

Traditional spreadsheets often fall short by relying on basic moving averages. They can’t handle complex scenarios, like overlapping promotions during peak seasons, leaving you to make educated guesses instead of informed choices. On the other hand, AI-powered tools can process millions of data points, cutting down manual inventory tasks by as much as 60%. This approach transforms raw data into actionable insights, ensuring smarter inventory decisions.

Why Demand Forecasting Helps Prevent Overstock

AI forecasting tools take a comprehensive view of your business by analyzing seasonal patterns, sales trends, and lead times all at once. Instead of simply looking at last month’s sales, these systems evaluate historical data, promotional impacts, and broader economic factors to create detailed 12-month demand plans. This approach helps you avoid two major pitfalls: ordering seasonal items too early and overestimating demand after a one-time sales spike.

Take Kimai, an online jewelry brand, as an example. In 2025, they integrated AI forecasting across three Shopify stores. By combining historical sales data with product-specific insights, they slashed delivery times by 43% and reduced production costs by 11%. Similarly, We Are Jolies minimized stockouts by 60% by maintaining balanced inventory levels for their best-sellers while avoiding overstocking slower-moving products.

To get the most accurate forecasts, clean your data by eliminating outliers, such as one-off spikes from social media campaigns or flash sales. Focus on key variables like past sales trends, current inventory levels, and supplier lead times to build a solid forecasting foundation.

Connecting Forecasting Tools to Shopify

Platforms like Forstock make it easy to integrate demand forecasting directly with Shopify. These tools sync your listings, orders, and inventory data in real time. Once connected, the AI dives into your sales history and current stock to generate precise reorder suggestions. It balances lead times with sales velocity, taking the guesswork out of inventory management.

"I open the dashboard in the morning and instantly know what needs reordering, what is overstocked, and what to focus on." - Emily, Inventory Manager

Start small by running a pilot test on a limited set of SKUs. This helps you set benchmarks for success and identify any issues before rolling out the system across your entire catalog. For high-priority products, pair your forecasts with a safety stock buffer to protect against unexpected supply chain hiccups. Revisit your forecasts every quarter to account for market shifts or changes in supplier performance. By integrating tools like Forstock with Shopify, you can create a seamless system for proactive inventory management.

Monitoring and Adjusting Your Automation Rules

Automation isn't a "set it and forget it" solution - it needs regular attention to stay effective. Sales patterns shift, supplier lead times fluctuate, and seasonal trends come and go. All of these factors can influence the performance of even the most carefully designed automation settings.

Once you've automated reordering, consistent monitoring is essential to keep your system aligned with market changes. Keep an eye on key metrics like inventory turnover and MAPE (Mean Absolute Percentage Error) to identify overstock issues or gaps in forecasting. For instance, comparing planned reorder dates with actual order placements can reveal problems with lead times or inaccurate predictions. Did you know that improving demand prediction accuracy by just 10% can reduce inventory costs by as much as 30%? That’s a game-changer for your bottom line. Tools like Forstock make this process easier with dashboards that flag potential issues, like SKUs labeled as "Excess", so you can address problems before they drain your resources.

Reviewing Supplier Performance and Sales Data

Your suppliers play a big role in how well your automation works. If supplier lead times increase, you’ll need to raise your reorder points. On the flip side, if suppliers improve their reliability, you might be able to lower your safety stock. Using methods like ABC analysis can help you fine-tune controls for high-value items.

Physical inventory counts are another critical step. Even small SKU errors can lead to incorrect reorders, so verifying your system’s data ensures accuracy. For large orders, consider setting approval thresholds to trigger manual reviews. This extra step can prevent costly mistakes.

While AI does a great job of improving reordering accuracy, consistent reviews of supplier performance and sales data provide the insights needed to keep your system running at its best.

Adjusting for Seasonal Changes

Seasonal trends add another layer of complexity to inventory management, but with the right adjustments, your automation rules can handle them seamlessly. For businesses with summer-focused products, for example, reorder points and safety stock should increase in spring and then decrease during slower months to avoid tying up cash in slow-moving inventory.

It’s a good idea to review and update your forecasts quarterly or whenever a major marketing campaign or busy season is approaching. Collaborating with your marketing team can help you anticipate demand spikes. For instance, you might manually adjust the Daily Sales Velocity in your automation settings to reflect expected increases. Comparing current seasonal performance with the same period in previous years can also offer valuable insights to refine your strategy.

Finally, using min/max thresholds can help you strike the right balance. Setting a minimum stock level triggers reorders when inventory dips too low, while a maximum level prevents overstocking and warehouse overflow during slower periods.

Conclusion

Say goodbye to juggling endless spreadsheets or constantly checking orders to prevent overstock. Instead, create a system that works smarter. By calculating reorder points based on actual sales trends and lead times, maintaining safety stock for unexpected demand spikes, and using demand forecasting to align orders with real-time needs, you can take control of your inventory without the stress.

Regular monitoring is the key to cutting costs. Review supplier performance, adjust for seasonal trends, and keep an eye on key metrics. Even small improvements in forecasting accuracy can lead to noticeable savings and a healthier bottom line.

This approach connects planning with execution seamlessly. For Shopify brands looking to simplify inventory management, Forstock offers tools like AI-powered forecasting, automated purchase orders, and dashboards that highlight excess SKUs before they become a problem. With features like 12-month demand plans and real-time analytics, you can make smarter purchasing decisions while avoiding the trap of overstocked inventory.

Start by setting up reorder points, tracking inventory levels, and incorporating demand forecasts. Then, gradually add features like supplier notifications and seasonal adjustments. The goal isn't perfection from day one but building a system that improves with each order cycle. This automated, data-driven approach lets you focus on growing your business instead of guessing your next move, turning inventory management into a powerful tool for growth.

FAQs

How can automated reorder points help avoid overstock?

Automating reorder points helps keep your inventory in check by setting specific thresholds that signal when it’s time to restock. Once your stock reaches the set level, the system automatically creates a purchase order, ensuring you only replace what’s necessary to meet expected demand.

This method reduces the chances of overstocking by syncing restocks with actual sales patterns, seasonal shifts, and supplier lead times. It keeps your inventory at just the right level, cuts down on surplus stock, and frees up cash for other important business priorities.

How does demand forecasting help prevent overstock in inventory management?

Demand forecasting plays a critical role in keeping inventory levels just right. By examining sales patterns, seasonal shifts, and supply chain dynamics, it helps predict the amount of stock you'll need down the line. This enables businesses to set precise reorder points, determine safety stock, and automate purchase orders ahead of time - avoiding the risks of running out of stock or overloading on inventory.

Forstock leverages AI-driven demand forecasting to make smarter reorder decisions using real-time data. By aligning with sales trends, lead times, and seasonal fluctuations, it helps Shopify brands fine-tune their inventory, boost cash flow, and steer clear of costly errors like over-ordering or tying up funds in surplus stock.

How can I set up automated purchase orders for my Shopify store?

To set up automated purchase orders in your Shopify store, the first step is linking Forstock to your Shopify account. This connection allows Forstock to sync key details like product SKUs, inventory levels, and supplier information directly from your store. Before moving forward, double-check that your Shopify product data is consistent - this includes SKUs, lead times, and minimum order quantities - so Forstock can handle supplier details accurately.

Once the connection is established, activate Forstock's AI-driven demand forecasting to define reorder triggers, such as when stock drops below a specific threshold (e.g., 30 units). Configure the system to automatically generate purchase orders based on your supplier rules. You can also enable automatic delivery, which sends purchase orders directly to suppliers via email or API. As goods are received, Forstock will update inventory levels in Shopify, ensuring everything stays aligned.

By following these steps, you can automate your purchase order process, simplify inventory management, and maintain a seamless integration with Shopify - all while avoiding overstock issues.

Related Blog Posts

• How AI Improves Reorder Point Accuracy
• Top Tools for Demand Forecasting on Shopify
• How to Automate Purchase Orders for Shopify Brands
• How to Automate Inventory Updates for Shopify