Stockouts. Overstocks. Delayed shipments. Missed revenue. They’re all signs of one thing: broken inventory purchasing.
If inventory purchasing is not done right, stock levels, fulfillment, margins, everything starts to shake. Teams try to fix symptoms instead of the root cause.
This guide is about fixing that foundation.
We walk you through how to plan purchases based on what’s actually needed, adjust for shifting demand, manage purchase orders effectively, and measure inventory purchasing efficiency.
Inventory purchasing follows a defined process that unfolds in stages, each step directly affecting how well inventory flows through the business.
Here’s a detailed breakdown of an ideal inventory purchasing process.
The first step is understanding how much inventory to buy, in what quantity, and by when. That decision isn’t based on a single number or a sales report.
It’s pulled from a combination of:
The planning window usually ranges between 3 to 6 months. Going beyond that risks becoming inaccurate due to shifting consumer behavior, new competitors entering the space, or internal product strategy changes. In fact, 65% of customers expect companies to adapt to their needs and preferences.
Once inputs are collected, teams use them to map expected demand by SKU, category, or product. Then, they calculate the ideal order quantity using the following formula
Required Inventory = Forecasted Sales + Safety Stock − Current Stock on Hand
This gives clarity not only on how much to order but also on when those items need to arrive at the warehouse to meet customer demand.
After the demand is projected, the purchasing team creates a purchasing request. This document serves as an internal communication tool for aligning operations, finance, and purchasing. It doesn't go to suppliers yet.
It includes
Once submitted, the finance team reviews the cost impact and cross-checks against budget availability. If changes are needed, whether due to cash constraints or overlapping stock, they’re made here before moving forward.
Once the purchasing request is approved, the purchase order (PO) is created, but not submitted yet. This is a pre-submission checkpoint.
The team waits until each item reaches its reorder point before finalizing the PO. The reorder point is calculated based on
Only when inventory levels near this point does the team open up the PO for a final review. This avoids tying up capital on products that aren't immediately needed.
At this stage, purchasing teams
Let’s say a PO was created in March for a product that sees peak sales in June. But by May, the product is seeing lower sell-through due to a sudden competitor launch.
In that case, the PO needs to be reduced or delayed, even if it was previously approved.
After the PO passes internal checks, it moves to vendor review. This isn’t always a smooth handoff. Vendors may respond with counter-offers, timeline extensions, or rejections.
Common issues vendors raise
If the vendor rejects the PO, two actions follow
Once the vendor confirms pricing, quantity, and delivery timeline, the inventory order is signed off and entered into their fulfillment queue.
Tip: Lock in pricing with a time-bound clause. If your vendor quotes a price valid for 10 days, send the signed PO within that window to avoid re-negotiation.
Once the supplier confirms the PO, the process shifts from internal coordination to external execution.
At this point, the vendor either moves the order into their production pipeline or allocates it from existing stock. But internal tracking doesn’t pause.
Procurement and logistics teams now step in to monitor the order through each stage of fulfillment, which includes
Operating on Shopify? Learn how to send POs to suppliers directly from Shopify in our blog.
Detailed milestone monitoring looks like this
Delays often come up at the execution stage due to customs clearance issues, port congestion, or booking backlogs. That’s why teams build in a buffer, especially for sea freight.
If a supplier confirms goods are ready on the 15th but freight availability is only on the 20th, that 5-day lag shifts warehouse arrival and impacts restock timelines. Teams update replenishment forecasts to reflect these delays and notify sales or planning functions in advance.
This is just one piece of the puzzle. Learn the full replenishment planning process in our post.
Once goods arrive at the warehouse or 3PL, the receiving team begins the GRN (Goods Receipt Note) and quality checks.
This process ensures that what was ordered is exactly what’s been delivered, physically, visually, and by specifications.
Here’s how the sequence flows
For example, if 5,000 glassware units are received and 20 arrive chipped, only 4,980 are approved. The remaining 20 are marked “Not OK to Stock” and excluded from payment.
With the GRN and QC completed, the finance team initiates the final phase, payment. This isn’t processed immediately. Before anything is cleared, a three-way match is conducted between the purchase order, the supplier’s invoice, and the goods receipt note.
The objective is to verify that what was ordered, what was delivered, and what’s being charged are in full alignment.
If the numbers match, finance confirms that the pricing and quantities are accurate, checks for any agreed discounts, and validates compliance with payment terms.
If the vendor has net 30 payment terms (30 days from the invoice date to pay the full amount) or you’re purchasing inventory on account, the system logs everything, and payment is scheduled accordingly.
When this entire process runs through one platform, teams aren’t waiting on updates from different functions. Purchasing knows what’s been approved, finance can track which POs are cleared for payment, and operations can see what’s been received.
Prediko makes this possible by bringing everything—customer orders, incoming POs, inventory receipts—into one view. It shows what’s been ordered, what still needs to be paid for, and what’s delayed, so everyone’s working with the same information, in real time.
That control improves accuracy and reduces inventory costs tied to holding excess stock or paying for items that haven’t arrived.
Behind every inventory purchase order are a few essential components that keep the process controlled, traceable, and structured. These are not steps, but recurring functions that shape how purchasing and inventory management decisions get executed.
A purchase requisition is the formal request raised internally to flag the need for stock. It outlines what’s needed, in what quantity, and why. No external vendor is involved at this stage, it’s meant to initiate internal alignment.
Once the requisition is submitted, it routes through approval based on order value, category, or department rules. This prevents unauthorized spending and ensures that purchases stay within budget and meet operational priorities.
After approval, the team selects a vendor. Supplier choice is based on reliability, price, delivery timelines, and past performance. Some companies maintain an approved vendor list, while others add in requests for quotation for new or high-value purchases.
Stuck with this? Read our guide on choosing the right supplier for your Shopify brand.
Terms like net 30, purchasing inventory on account, or milestone-based payments are agreed upon during order confirmation.
Payment is released only after goods are received and matched with the invoice and PO. This ties procurement with finance and closes the purchasing loop.
We saw that inventory purchasing involves quite a few steps, and along the way, you're bound to face a few challenges. These include
Ordering more than necessary often feels like playing it safe. But the long-term cost of excess inventory shows up in ways that aren’t always obvious.
Do the math.
According to the Journal of Risk and Financial Management, annual holding costs range between 16% to 20% of inventory value. That includes warehousing, depreciation, shrinkage, and opportunity cost.
If you’re holding $400,000 worth of excess stock, and the average holding cost is 18%, here’s what that looks like:
These aren’t indirect costs. They're measurable losses eating into profit margins while also limiting flexibility in replenishment cycles.
Deadstock usually builds up when
The operational impact is just as real. Overstock clutters picking zones, slows down warehouse staff, and creates confusion during replenishment. It also complicates inventory valuation, making financial reporting less accurate.
In 2023, Adidas reported over €500 million worth of unsold Yeezy inventory after cutting ties with Kanye West. That stock sat in warehouses with no sales channel, forcing the brand to write it down and consider donation or destruction.
Prediko helps you avoid dead stock by forecasting while accounting for growth trends and seasonality—no over- or under-buying. It factors in current stock, flags overstocked SKUs, and tells you exactly what to reorder and when.
Confusing SKUs causing reorder mistakes? This guide will help you set up and manage Shopify SKUs the right way.
There’s a quiet kind of panic when you know your bestseller is about to run out. Not when it’s gone, when you see “6 left in stock” and know they’ll be gone in two hours. At that point, it’s too late. No time to reorder, no time to reroute. And customers won’t wait. They’ll buy it elsewhere.
It feels like a supply issue, but it’s a forecasting miss. Orders were placed using old sales data or fixed lead times.
But demand doesn’t follow a schedule. It shifts fast, maybe from a product mention, maybe from a trend. And those changes don’t show up in spreadsheets. They show up when you’re already out.
Here’s what happens when that cycle breaks
In short, everything slips. Slowly at first, then all at once.
Prediko is built to handle such situations. It learns from demand in motion. It tracks sales velocity, recent stockouts, even supplier lead times, and calculates what needs ordering before things break.
It’s not just based on what sold last season. It’s looking at what’s happening this minute.
And when a reorder is needed, Prediko doesn’t just say “you’re low.”
It tells you what to order, how much, from where, and when.
Because predicting demand isn’t just about having the data. It’s about surfacing the right decision, while there’s still time to make it.
Struggling with stockouts due to poor tracking? Here’s a guide on how to track inventory accurately on Shopify.
When suppliers fail to deliver on time, even well-planned purchasing starts to break down. Delays disrupt the inbound flow of goods, push out delivery timelines, and create gaps between projected and actual inventory levels.
What was forecasted to arrive in five days suddenly takes ten, and every downstream team has to adjust.
The issue goes beyond timing. Unreliable suppliers lead to inconsistent fill rates, partial shipments, and unclear ETAs, which makes it difficult to plan or commit to inventory availability and customer orders.
It increases follow-up work, creates uncertainty in replenishment cycles, and forces teams to build unnecessary buffers just to stay covered.
Managing suppliers can be tricky. Learn how to build better supplier relationships and handle common challenges.
Manual purchasing relies on disconnected tools, emails, spreadsheets, and scattered notes that aren’t designed for scale. Reorders are tracked informally, past purchases are hard to trace, and lead times or delivery updates often go unrecorded.
As volume increases or responsibilities shift, these gaps lead to missed steps, duplicated POs, and inaccurate order quantities.
Without a centralized system, teams work with incomplete or outdated information. There’s no visibility into order status, no automated checks for supplier lead times, and no consistent way to verify what’s been ordered and received.
Purchasing becomes reactive, with teams spending time resolving errors instead of making informed decisions.
Prediko gives teams one place to generate, share, and manage every PO in real-time. You can check supplier lead times, monitor order status, and update delivery dates without chasing multiple systems or emails.
Everything stays linked to the original PO, so teams always know what’s been ordered, received, or delayed.
To make your inventory purchasing smarter, not harder, follow these best practices.
To purchase right, you need forecasting that’s grounded in actual patterns and numbers.
Historical data gives you a picture of what typically moves and when. Seasonal data layers on trends tied to holidays, weather, or industry cycles. Real-time data shows what's happening right now, including sudden spikes or slowdowns in customer behavior.
Using these three data types together helps answer key questions
Without adequate data to make predictions, you either end up with too much stock sitting on shelves or going out of stock when demand surges. Both are expensive mistakes. Accurate forecasting lets you match purchasing to actual need.
Prediko auto-collects your past sales data, seasonality, and trends to generate accurate demand forecasts so that you are ordering enough inventory at the right time.
A reorder point is the stock level at which you trigger a new PO. When inventory drops to this number, it's time to restock. But static reorder points don't hold up when customer demand shifts, suppliers delay shipments, or lead times change.
Reorder points must be dynamic and use current sales velocity, lead time, and safety stock to adjust automatically. They aren't fixed. They shift as new data comes in, making them more responsive to real conditions.
Why this works
Setting reorder points dynamically keeps your purchasing decisions tied to how products are actually moving, not how they moved last quarter. That helps keep stock lean but ready.
With Prediko, you don’t need to define fixed reorder points. Just set your min and max days of cover, and the system sends alerts based on actual sales, seasonality, and demand trends. It adapts automatically as new data comes in.
EOQ is a simple formula that calculates the ideal order quantity by balancing
When you’re guessing how much to order, you will end up reacting to the moment. When you use EOQ, you’re making decisions based on actual cost patterns. No more “just in case” overstocking or panic reordering.
All you need to do is plug in your annual demand, ordering cost per purchase order, and cost to hold each unit in this formula.
EOQ = √((2 × D × S) ÷ H)
Where:
You get a number, your EOQ. That’s your target order size. Stick close to that number and you’ll keep costs down without running dry.
Prediko runs this calculation for you in the background and recommends the reorder quantity and timing based on your actual sales, stock, and lead times.
Suppliers impact more than just price. They influence how accurate your purchasing decisions can be. If delivery times are inconsistent or communication is limited, it introduces uncertainty across your entire inventory flow.
What matters in a supplier relationship is measurable consistency, actual lead times, not estimated ones.
Because
Prediko lets you input supplier lead times directly, so you’re not relying on static spreadsheets or email threads to manage them. You can generate POs in one click and send them to suppliers instantly with in-app email.
Once a PO is issued, it’s trackable in real time. Teams can see when it’s delayed, received, or partially fulfilled, and can follow up without switching tools. This keeps communication tight and lets you act early if something is off.
Inventory purchasing runs on decisions. What to buy, when to buy it, how much to spend, and which supplier to trust. When these decisions are made without the full picture, stockouts and overordering creep in fast.
But when you’ve got the right tools backing those choices, the process becomes faster to act on, easier to monitor, and more reliable week after week.
That’s what inventory purchasing software should do: support the day-to-day without forcing your team to keep track of everything manually.
The value of automation isn’t in eliminating tasks, it’s in keeping your purchasing process stable, even as demand shifts, SKUs expand, or delivery timelines stretch.
It keeps your reordering accurate without manual inputs and makes sure nothing slips through because someone forgot to update a number.
With the right software, teams can
Not every software handles the entire inventory purchasing process. Some help with ordering. Others focus on reporting. The ones that work best cover more than just one step.
There are a few features that make the biggest difference.
These aren’t nice-to-haves. They shape the accuracy and timing of every purchase you make.
Here are four KPIs worth keeping an eye on, not in isolation, but together. Because purchasing efficiency isn’t one number, it’s a combination of signals.
Inventory turnover tells you how quickly your products are selling through and being replenished. It’s the classic “are we moving stock or hoarding it” metric.
A high turnover usually means products are selling fast or you're ordering in the right quantities. A low turnover might be a warning, too much cash tied up in stock that isn’t going anywhere.
Inventory Turnover = Cost of Goods Sold ÷ Average Inventory
This helps spot slow movers that need less frequent ordering, or even discounting. It also tells you which items are worth reordering frequently.
Order cycle time measures the total time it takes from placing inventory orders to having the inventory ready for sale. It captures both supplier performance and internal processes.
Shorter cycle times suggest that your purchasing, supplier coordination, and receiving workflows are working well. Longer cycle times can point to delays, either from external vendors or bottlenecks within your own system.
Order Cycle Time = Inventory Delivery Date – Purchase Order Date
If you’re frequently short on stock or rushing orders, cycle time is the number to watch.
Purchase order accuracy looks at how often the order you receive matches what you originally requested. That includes quantity, product specifications, and delivery timing.
High PO accuracy is a sign of well-managed purchasing processes and strong supplier communication. Low accuracy introduces downstream issues, including receiving errors, stockouts, and more back-and-forth between teams.
Purchase Order Accuracy = (Number of Accurate Orders ÷ Total Orders) × 100
Consistently low accuracy often points to poor supplier communication or an overly manual ordering system. Fixing it usually pays off fast.
This KPI tracks two connected things: how long suppliers take to deliver, and how often they meet the promised delivery window.
Past supplier performance helps you plan better. If a supplier consistently takes longer than promised, it can throw off your entire inventory forecast. Having actual delivery data allows you to set more realistic lead-time buffers and adjust your reorder schedules.
You can’t afford to work with averages here. One slow supplier in a chain can throw your whole purchasing rhythm off. This KPI helps prevent that.
Most teams track these numbers manually, jumping between spreadsheets, emails, and dashboards to piece them together. That takes time and leaves room for error. Prediko gives you all the data you need to accurately calculate inventory purchasing efficiency.
Prediko is an AI-powered inventory planning and management software that understands your inventory performance, your sales patterns, and your supplier behavior, and helps you plan and execute around all of it.
Instead of making separate decisions for demand, supply, and purchasing, Prediko brings them together in one place. Everything from what to order to when it should arrive is handled inside a single platform, using real-time business data to guide your next steps.
In short, Prediko helps with planning, execution, and follow-through by tying together all the moving parts. Here’s how
Prediko reviews your past sales, seasonal patterns, and velocity shifts, then projects demand for the upcoming 12 months. It adjusts as new sales data comes in, so your forecasts stay accurate.
This feature factors in supplier lead times and safety stock along with sales data to tell you what to order, when, and in what quantities, by location, product, and timing, like a buying plan.
The recommendations are adjusted in real time if sales trends change. There’s no static reorder point, everything is linked to movement and lead times.
Finished goods planning only works if the components behind them are also available. Prediko connects raw material requirements to the demand forecast of the final products.
Once your demand plan is ready, you can raise purchase orders directly from where you forecast. Email suppliers from within Prediko, export POs as PDFs, and track their status in real-time. You can also connect your WMS or 3PL to keep everything synced and up to date.
Prediko tracks sales and inventory performance in the background. You get reports on sell-through rate, COGS, ABC analysis, inventory retail value, and more. There’s no need to pull reports from multiple systems.
Prediko doesn’t just support your workflow. It becomes the platform where your entire inventory purchasing process runs, accurately, automatically, and with every team on the same page.
Start your 14-day free trial and see how Prediko fits into your inventory processes from day one.
Demand trends, supplier lead times, and available storage space all play a key role in deciding what, when, and how much to purchase.
Inventory should be purchased based on sales velocity, stock levels, and lead time, not on a fixed schedule, so timing stays aligned with actual need.
Use past sales data, forecasted demand, and current stock levels to calculate reorder quantities. Apps like Prediko do all the calculations for you and suggest exactly how much to order, factoring in lead times, safety stock, and expected sales spikes.
