Overview
The right on-hand level is a trade-off between customer promise and working capital. Too low and you stock out; too high and you create dead stock and slow inventory turnover. Rather than copying a generic rule, you should base on-hand targets on demand, lead times, and your willingness to hold 20–30% of unit cost per year in carrying cost.
Use days of supply as the primary lens
Instead of thinking in units, think in days of supply as defined in /questions/what-is-days-of-supply. This lets you compare across SKUs and align on-hand levels with your target inventory turnover of 6–8× per year rather than maintaining arbitrary counts.
Anchor targets to lead time and safety stock
Calculate lead time demand from Shopify Analytics → Sales by product and supplier lead times, then add safety stock using /calculators/safety-stock-calculator. The target on-hand formula combines these into a clear quantity that reflects both demand and risk tolerance.
Respect carrying cost when setting upper bounds
Remember that inventory carrying cost typically runs 20–30% of unit cost per year, so doubling on-hand stock effectively increases that capital charge significantly. Use the carrying cost benchmark as a ceiling when considering holding extra units for convenience or discounts.
Adjust on-hand targets as Stocky sunsets
If you currently rely on Stocky to tell you how much to keep on hand, note that it will be discontinued on August 31, 2026. Synplex lets you define and refine target days of supply and safety stock per SKU so your on-hand decisions remain data-driven after Stocky disappears.
Formula
Target on-hand = Lead time demand + Safety stock
- Lead time demand — Lead time demand: Expected demand during replenishment lead time
- Safety stock — Safety stock: Extra units held to cover variability
Worked examples
Furniture brand balancing long lead times and high unit cost
- Average daily sales: 5 units
- Supplier lead time: 60 days
- Safety stock: 50 units
- 1. Compute lead time demand as 5 units per day × 60 days = 300 units.
- 2. Add safety stock of 50 units calculated via /calculators/safety-stock-calculator.
- 3. Set target on-hand inventory at 350 units while checking carrying cost implications.
Result: The target on-hand level is 350 units for that SKU under current demand and lead time assumptions.
This number reflects both service level and the reality of long lead times and high carrying costs, rather than a guess or round number.
How to apply this in Shopify
Use Shopify Analytics → Reports → Inventory to see current days of supply and on-hand stock across SKUs.
In Admin → Products → Inventory, set clear stock policies per product type, such as higher on-hand for bestsellers.
Use Admin → Transfers to ensure sufficient on-hand stock at your primary fulfillment location before major campaigns.
Apply Inventory adjustments after physical counts so your on-hand targets rest on accurate data.
Combine Admin → Purchase orders and current on-hand to understand total available and pipeline inventory when reviewing targets.
Common mistakes
Using the same on-hand target for all SKUs
Treating every SKU the same ignores differences in demand, margins, and lead times, leading to dead stock in some products and stockouts in others.
Fix: Segment SKUs by velocity and margin using Shopify Analytics → Reports → Inventory and set different days-of-supply targets per segment.
Ignoring carrying cost when increasing stock
Holding extra units for peace of mind without recognizing that carrying cost is 20–30% of unit cost per year erodes profitability.
Fix: Calculate the annual carrying cost impact before approving large increases in target on-hand levels.
Relying on Stocky for target stock levels with no backup
Letting Stocky define how much to keep on hand without a migration path will leave you guessing once the app is discontinued.
Fix: Move target days-of-supply and safety stock logic into Synplex so you keep structured targets after August 31, 2026.
Frequently asked questions
Related resources
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