How to Carry Out Effective Stock Replenishment? Unlock Profitability Ensuring Smooth Flow of Material Supply !!
Replenishment is the controlled and regular movement of inventory from an upstream point on the supply chain to a downstream location that requires sufficient stock to cover demand. The process of inventory replenishment varies depending on the type of business and circumstances. For example, it can refer to any of the following situations:
- shipping raw materials from suppliers to manufacturing facilities;
- moving inventory from reserve product storage to packing and shipment locations;
- ordering inventory from suppliers to ensure that a warehouse or fulfillment center has adequate product; and
- relocating stock from a warehouse to a pickup facility or retail.
Replenishment not only deals with ensuring the item a customer is looking for is in stock, but it also applies to when to reorder the item. In the business world, replenishment means ensuring that a supplier or retailer only orders a product to support an anticipated need.
Suppliers can easily manage when and what out-of-stock (OSS) items need reordering with a replenishment process in place.
Inventory levels can be assessed and replenished:
- Daily
- Weekly
- Bi-weekly
- Monthly
- Quarterly
The frequency with which this is done depends on the business’s products and customer demand. Businesses with predictable customer demand and large warehouse capacity often employ this method.
This approach is harder for larger retailers to manage as it offers limited visibility into inventory levels.
Reorder point method
The reorder point replenishment method is based on stock levels rather than time periods. For example, if one of your product lines typically has 1000 units in stock, a possible reorder point would be when the stock reaches 300 units. The reorder point triggers at 300 units, and then purchasing stock orders are placed to replenish the stock back up to 1000 units.
Inventory replenishment best practices for this automation reorder point method requires real-time inventory tracking software for accuracy and optimal stock levels. The reorder point method maintains consistent inventory levels to avoid stockout issues.
However, you may have excessive stock or not enough stock when demand or supply chain shifts.
Great stock replenishment can add value along the entire supply chain. The elements of stock replenishment are
Manufacturers – ensures a continuous supply of raw materials and prevents costly delays in production.
Wholesalers – allows them to fulfill customer orders on time, keeping them loyal and coming back for more.
Retailers – helps prevent dreaded ‘out-of-stock’ scenarios and keeps customer reviews positive which is terrific for any brand.
Lead times – how quickly is the order needed? Is it worth paying more for a faster shipment to fulfill important customer orders?
Quantity – is the discount achieved by bulk-buying outweighed by higher carrying costs and tying up additional capital?
Min/max quantities – based on forecasts, which items are the best to add to an order to reach a supplier’s min order quantity?
Effective stock replenishment typically follows a nine-step process. You can use these steps in your own inventory planning process to ensure efficient flow of new stock. You can also use this method to avoid costly overstocking (where you have more inventory than you can sell or store) or stockouts, where you have too little stock and can’t fulfill customer orders.
- Assess your current situation.
- Be the first to add your personal experience.
- Implement a replenishment strategy.
- Use inventory optimization software.
- Apply lean principles.
- Collaborate with your stakeholders.
- Identify obsolete stock (discontinued products, expired products)
- Identify slow movers (low selling items)
- Cancel current purchase orders. Sometimes companies forget to cancel automatic orders for discontinued products. If they are products you are still selling, you need to recalculate the replenishment with lower values (and you may still need to cancel all orders in the short term).
- Return products to the supplier. Try it if it is part of your supplier’s policy.
- Make promotions. And get in touch with your Marketing department if necessary.
- Cancel new products or postpone launching. You may have new collections planned to replace the current slow-moving stock, but you need to liquidate it first, or you will be overwhelmed.
- Make donations. Before thinking about destroying the products, you can donate the products to charitable contributions.
- Destroy the excess inventory. This is the worst-case scenario.
- Keep tracking your SLOB (Clean Slow and Obsolete Stocks) inventory and be proactive.
Automating your stock data analysis and purchase order process means you and your staffs’ previous hard work is done for you, resulting in some serious benefits for your business:
- Reduced administrative and processing costs previously spent on labour and manual systems.
- Improved stock rotation by reducing slow-moving inventory and providing more space to display fast-moving products.
- Flexible, comprehensive reporting that provides clear measurement and tracking for your suppliers and fulfilment.
- A superior customer experience by ensuring your supply matches customer demand
- Issues and anomalies are quickly identified. Easily investigate and determine the source of low run rates across your stores.
- Increased staff capacity and productivity by saving up to 50% of labour time previously spent on manual stock ordering tasks.
- Revenue growth through removing the risk of overstocks and understocks, maximising the return on investment, reduce the need for clearance sales.
- Scalable growth that allows you to expand your operation without needing to invest in administrative resources.
Take a moment to review the following issues and indications of poor stock control and think about how much time, resources, and revenue you’re losing to manual stock ordering processes: Of course these shows the limitations of an organisation to stock replenishment.
- Your product availability has recurringly been low and you’re frequently adding stock to clearance sales due to overstocking.
- There’s considerable employee resourcing being spent on stock replenishment tasks.
- A significant amount of investment is tied up in inventory that’s not selling
- Replenishment expenses are consistently high.
Want to go the extra mile with your inventory replenishment strategy? Here are a few ways you can aid replenishment in creating a seamless fulfillment experience for your customers:
Optimize Your Warehouse
Inventory efficiency is heavily dependent on warehouse organization. This doesn’t just mean having enough space to keep your stock tidy—it also means strategically placing inventory to flow in and out of your warehouse in the most effective manner possible.
Fast-moving inventory should be placed toward the front of the warehouse and on easily-accessible shelves, as this will also make constant replenishment easier.
Increase Visibility
Literal visibility of your products is one thing, but you also need to have good visibility of the journey your products take from the manufacturer to the customer’s front porch.
The most optimized inventory visibility allows you to know where each product is in its journey through the fulfillment process.
Inventory replenishment relies on providing accurate and real-time data to your suppliers, so they always are informed when stock levels are low.
The other best Strategies are
Use inventory management software
Keep safety stock on hand
Use agile replenishment methods
Use hard data over gut instinct
Aim for continuous improvement
These emerging technologies have the potential to revolutionize inventory management, further optimizing processes and enhancing overall business performance.
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