What is stock replenishment?

Why is stock replenishment so important?

Inventory management software to help with stock replenishment Stock replenishment is one of the most important things you have to consider when it comes to inventory management. Stock replenishment helps to ensure the right stock is on the shelves at the right time, this can help with keeping inventory holding costs low and it will definitely make your customers happy.

 

 

Stock replenishment is an operation that consists of keeping the inventory flowing through the supply chain at an optimal rate by maintaining stock levels. This prevents costly inventory overstocking.

In this post, we’ll walk you through a couple of useful strategies which are essential when it comes to stock replenishment.

 

Always collect stocking data

Data from your warehouse locations is a powerful performance indicator and can also indicate how your replenishment process is currently working. If you have multiple warehouses, you will have to collect data from each warehouse and analyze the data accordingly.

Inventory management system - how to know when to replenish stock?Data from each of your warehouses will allow you to gain better insight into things like:

  • How fast do your products move off the shelves
  • Which of your products is replenished more often
  • How fast does a product reach a reorder point
  • Are you reordering the right quantity
  • Are you reordering too frequently, or not frequently enough?

Once you have gathered the information from your warehouses, you’ll have to analyze the data for more accurate demand forecasting. If you can forecast the demand more accurately, it means that you will be able to predict how much of a product gets sold in a given period of time – preventing out-of-stocks that could hurt your relationship with customers.

 

 

Now that we know what to look for, you’re probably asking – what is a product’s reorder point?  

The reorder point is the stock level that indicates that you will need to order new inventory. It is determined by a number of factors, but mainly it depends on your demand forecasts and lead forecasts.

Demand forecast– how quickly your remaining stock will deplete

Lead time forecast – the time it takes your shipment to arrive

 

So when should you order new inventory?

You know so far that you have to replenish your inventory when it reaches the reorder point – but how do you know exactly when that will happen?

There are 2 strategies for reviewing stock levels:

  • Continuous review: this means that your stock levels are constantly under review until they reach the reorder point. This strategy is ideal for larger companies that have fast sales cycles and resources to constantly measure their stock levels, in particular, an inventory management system
  • Periodic review: this involves reviewing your inventory in a periodic cycle. This can be weekly, monthly, or whatever your demand and lead time forecasts dictate. This is ideal for start-up businesses or brands which have slower sales cycles.

 

How much should you order?

We’ve determined at what point you should order new inventory, now let’s find out how much you should order. This can be determined with two approaches:

  • Fixed order quantity – This is very simple, every time your inventory reaches a certain stock value, you reorder the same quantity. This is ideal for businesses using a continuous review strategy.
  • Order up-to x level – this method is used by companies that have a certain level of products stocked at the beginning of every review period. This means that you will have to order however much stock it takes to reach that level. This is ideal for businesses that have less frequent review periods – in this case, the order-up level should be determined by your demand and lead time forecast – because it has to last until the next periodic review

Inventory management can be a headache without having the proper tools at your disposal. Nventree was developed to help you manage your inventory even if it means that your products are in different warehouses. Our software syncs up with your eCommerce platforms and adjusts the stocks on all of them if a sale is recorded. This helps you avoid overselling items and gives you a clear overview of your stock levels – making it a lot easier to spot that elusive reorder point!