Factors that impact inventory replenishment

What is inventory replenishment?

Fergal Glynn Last Updated: July 2nd, 2019

For busy warehouses, the world over, the subject of inventory — particularly its management, strategies and systems — is a hot topic. No doubt, this is because customers are getting spoiled by lightening-fast order fulfillment times from the big guys. Because of this, inventory replenishment is something that needs to be taken very seriously; it’s a factor that can determine the efficient flow of your goods as they move throughout your entire supply chain.

Definition of inventory replenishment What is inventory replenishment?

Inventory replenishment, otherwise known as stock replenishment, refers to the process of inventory moving from reserve storage to primary storage, then onto picking locations. It’s important to note that inventory replenishment is sometimes used to define both ready-to-sell inventory as well as raw materials received from suppliers.

How inventory replenishment works

Depending on the unique structuring of your business, a team or series of teams will be compiled to oversee inventory. Usually, these teams consist of the warehouse managers and/or planners who focus on ensuring that the company has enough stock to produce goods and/or fulfill orders.

These teams can be broken down into a variety of disciplines, with some focusing on inventory ordering procedures as the company grows and evolves, and others grappling with the short-term; the latter are the professionals who spend their time monitoring the inventory counts.

When the counts drop to the pre-proposed re-order point, then the designated team will contact the appropriate parties within the supply chain to replenish the items. Remember, this occurs with both ready-to-sell inventory as well as raw materials, direct from the supplier.

Every competent warehouse has its own set of replenishment rules. Typically, these are somewhat moveable, depending on the severity of the case, but they are usually written after a demand forecast is produced.

Factors that impact inventory replenishment

If you ask any seasoned warehouse manager, planner, salesperson, product manager or warehouse worker about stressful events that transpire in warehouses, chances are they will mention that stress levels can peak quickly when inventory replenishment plans fail. As mentioned above, all competent warehouses have strategies that relate to replenishment, but that doesn’t mean that every plan will cover every unforeseen situation. Factors that impact inventory replenishment

Let’s look at some of the most pressing factors that impact even the most adept warehouses’ replenishment strategies:

Your company’s forecast has fluctuated

Because all forecasts consist of unconfirmed demand, there’s no question that the numbers can fluctuate greatly based on the changing needs of customers. Another issue would be if one of your suppliers experiences a hiccup and your company can’t secure comparable raw materials in time for production to be unaffected.

Your warehouse space is not optimized

A common point of contention that warehouse managers and planners face concerns the utilization of warehouse space. Perhaps, a planner wants to secure “x” amount of space for the holding of extra inventory or raw materials. If the warehouse manager is not able to provide the appropriate space, then the agreed-upon inventory replenishment plan cannot be fully utilized.

Your end-to-end visibility is poor

These days, end-to-end visibility is the name of the game when it comes to supply chain efficiency. When you don’t provide accurate, real-time info regarding your current stock levels to your suppliers, then there can be a delay in replenishment.

Best practices for seamless inventory replenishment

To ensure that your company is always able to replenish its inventory as needed, be sure to follow these best practices:

Assess and re-assess your forecast

Include all parties in this discussion, from your planners to your sales team to your warehouse manager to your suppliers, long-term customers and beyond. Ensure that your colleagues have their own forecasts ready before meeting and compare these numbers against the specific factors that affect your business’ replenishment plan. And, when you’re there, come up with a realistic plan to execute if and when your current replenishment plan and/or forecast fails.

Formulate effective stocking level strategies

Stocking level strategies vary depending on the size and specialty of the business, which means that yours must be tailor-made to fit the needs of your inventory and supply chain. If you are starting from scratch when it comes to strategy, be doubly clear that all parties involved — especially your long-term customers and suppliers — are aware of your strictest targets. It’s only then that you can discuss your stocking level strategies in terms of hard data.

Create better end-to-end visibility

Do your due diligence to ensure that your entire supply chain is in the loop when it comes to your changing stock levels. Within this system, make room for additional information that details shipment times within your fleet.

As you can see, when it comes to replenishment, so many of the challenges concern communication, organization and competent forecasting. Be flexible and realistic about your numbers so that your company never has to deal with a lack or surplus of inventory.

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