Inventory replenishment is necessary for every business that stocks products and maintains inventory for selling to consumers. With the advancement of technology, the expectations of consumers are constantly rising and they expect their order to be fulfilled at the right time without having to wait for long intervals. Thus, a proper inventory planning should be in place which should align with the demand predictions.
Replenishment is an ongoing practice for most businesses in DTC, Retail, F&B etc.. It ensures the right products are in the right nodes of the supply chain in the optimal quantities. When the replenishment process is well-managed, inventory can be picked and packed as soon as customer orders come in. Retails restock the items in the inventory that have been sold out. However, this processis not enough for businesses to refill their inventory. Businesses should have information on what items to restock, how many items should be restocked, and the demand for specific products in the upcoming months. Companies should have exact information on when the demand would fall for a particular item so that they stop restocking.
The inventory replenishment process is constant, and businesses must constantly enhance their operational efficiency and service levels. All the supply chain stages, from manufacturing to retail, depend on the inventory replenishment process to ensure that the accurate items are in stock to satisfy demand. Customers do not want to wait long to get the products they ordered. If their orders are not fulfilled on time, they will shift to your competitors for their needs. This would result in lost sales, and you would lose customer loyalty.
Thus, businesses need the best replenishment planning techniques and software to replenish the inventory goods in time. But let us first have a look at what inventory replenishment is.
What is Inventory Replenishment?
It is the process of keeping track of storing, acquiring, managing, and using the inventory product at any point and is an essential part of the entire supply chain. Inventory management enables you to store the right quantity of products at the right place and time, and you can utilize inventory management software for this purpose.
Once you have the correct location of every product, you can monitor your stock levels in real-time at a granular level. Knowing how much inventory you have and the location of the inventory, you can manage your inventory efficiently. Using robust replenishment planning software, you do not need to go through tedious manual inventory management processes.
With accurate inventory details across every sales channel, you can automate the reordering process by setting a reorder point, thereby creating more efficiencies in the stock management process.
Benefits of Inventory Replenishment for Businesses
Businesses can reap a lot of benefits with accurate inventory replenishment planning in place.
- Minimizing Inaccuracies – When you try to manually keep track of your inventory, there are bound to be mistakes such as data duplicity. With an inventory planning system, you can automate the data tracking operations without any scope for errors.
- Increased Efficiency – You can see what items you are selling through the different channels with reports and analytics and make informed decisions for identifying a trend.
- Satisfied Customers – If you have a proper inventory replenishment plan, your customers would return for more beacuse of timely delivery of products. You can build client loyalty with a robust stock management strategy, provide excellent service and build a good brand image.
- Data Security – You can control which user gets to access the data and allow or restrict users from viewing information, so there is no scope for errors. Another benefit is that you can have security at every level.
- Save Costs – With replenishment planning, you can overcome overstocking or locking up inventory in dead stock. This helps you to save money as you can save the cost of excess storage, heating, and refrigerating products. You can also estimate the safety stock and get product history through which you can restock and manage inventory.
- Reduce Costs and Enhance Profits – With accurate inventory planning, you can minimize expenses and increase your profit. You can reduce unnecessary expenses, and through data analytics, you can know in advance which item would have an increase in demand.
- Reduced Out-of-losses – With proper inventory planning, businesses can ensure that sales losses are avoided and the inventory is optimally stocked for meeting fluctuating demands. Out of stock situations can result in customer dissatisfaction and thereby affect customer loyalty.
- Decrease is locked Working Capital – Without a proper replenishment plan in place, there are chances of overstocking which can lead to locking up resources in slow-moving stock or dead stock.
Replenishment Planning Techniques
Reorder Point Strategy
In this strategy, you have a stock level that indicates that you need to restock items. You should also set a maximum inventory level, reducing the risk of overstocking. Inventory levels are constantly checked to replenish items when the inventory goes below the reorder point.
Inventory is restocked at periodic intervals. You might check the inventory levels every three months to see if they need replenishment and if the levels are alright, you need not reorder anything. However,if the inventory runs out before time, the inventory is not replenished before the next cycle.
One of the popular techniques of inventory replenishment is Just-in-Time inventory, in which the inventory is delivered just in time when it is required for production. This technique allows you to reduce wastage and improve productivity and efficiency. The objective of the JIT is to offer the exact quantities needed for fulfilling the required production. This method requires the manufacturers to rely on suppliers to fulfill their demands on time.
Fountain9 is a company that assists retailers in maintaining their inventory to an optimal level. Their AI-based replenishment planning software, Kronoscope, allows you to predict the demand for every SKU unit separately and maintain stock accordingly to prevent lost sales,overstocking and reduce wastage. It helps to raise the profit margin and satisfy consumer demand at the right time. Kronoscope also helps to pick the right supplier by calculating multiple factors such as lead time, pricing and the dynamic nature of demand.