Inventory Replenishment- Warehouse

What Is Inventory Replenishment?

What does replenishment mean for Warehouse Industry? Inventory replenishment (also called stock replenishment) describes the method of getting new stock back to your pick area. You would like to exchange stock that you simply sold – replenish inventory. confine mind that your pick area encompasses quite a physical area within the warehouse — it also includes a “virtual pick area,” so to talk. 

What is Replenishment?

Consider the instance of the lady trying to get a dress online – a dress she’d just seen within the store a couple of minutes earlier. albeit the item was technically available, it wasn’t within the virtual pick area where she could place an order. 

Today, retailers are competing with inventory wizards like Amazon who have well-funded and well-oiled fulfilment operations. Losing easy sales like this one damages a retailer’s profitability over time.

Fortunately, these sorts of lost sales are often avoided with a bulletproof inventory replenishment strategy. to make an efficient retail replenishment strategy, companies got to plan to the method, which includes:

Gathering real-time inventory data

Obtaining end-to-end visibility over your entire supply chain

Collaborating with salespeople, inventory managers, long-term customers, and suppliers to make demand forecasts and replenish inventory

Identifying the factors that would significantly impact your demand forecast and inventory replenishment strategy, including entry or departure of a competitor, seasonal demand, and issues with suppliers

Creating a contingency plan for what you’ll do if your demand forecast fails

Drafting stock replenishment rules

Obtaining Access to Real-Time Inventory Data

In 2020, retailers must specialise in real-time inventory data within their businesses. 

What’s the difference between real-time data and static inventory data?

Static data requires inventory managers to manually update inventory information. A manager would check out the numbers from the last inventory count and adjust that figure supported the sales volume over the previous period. 

In today’s fast-moving, trillion-dollar e-commerce market, retailers that use static inventory data are at a clear disadvantage. For one thing, they’re battling a time delay. for an additional, they don’t have the groundwork necessary for an omnichannel inventory management strategy, which puts them steps behind their competition.

With an omnichannel inventory management strategy, retailers can fulfil orders with inventory from anywhere within the business. as an example, in our earlier example, what likely happened is that the e-commerce site’s order fulfilment system was only tied to the inventory at a 1 warehouse.

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As a result, the order management system didn’t know that there have been eight dresses available at one among the shop locations. 

If the corporate had been using an omnichannel inventory strategy, its system could have checked the inventory numbers of all other warehouses – and even store locations – and therefore the sale would are won. 

Retailers and warehouses curious about embracing an omnichannel inventory management strategy don’t get to spend their entire fulfilment infrastructure to accomplish it. they will implement cloud-based inventory management software to realize access to accurate inventory data from across their supply chain.

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With real-time inventory management software, retailers have the info they have to develop endless replenishment program.

The Importance of End-to-End Visibility and Inventory & Stock Replenishment

Supply chain visibility refers to a business’s ability to know what’s happening and when it’s happening, from the supply of raw materials all the thanks to the fulfilment of customer orders. 

Of course, obtaining visibility over your supply chain is simpler said than done since it requires the cooperation of all of your supply chain partners. 

If you’re a mega-retailer, like Wal-Mart, you’ve got the clout and therefore the order volume to form certain demands from your upstream supply chain partners. 

If you’re a smaller or medium-sized organization, it is often harder to urge your partners to cooperate, either because they don’t want to or because they don’t have the resources to accommodate your requests. 

That said, there are a couple of ways in which retailers can make the case for supply chain cooperation. 

Demonstrate How Supply Chain Cooperation and Communication Reduces The Bullwhip Effect

The bullwhip effect also called the Forrester effect, maybe a phenomenon in supply chain management that always results in backorders.

It occurs when supply chain partners receive a bit of data and either overreact or underreact in response. 

Let’s say there’s a 7 per cent increase in demand, but supply chain partners interpret it as a 30 per cent increase in demand and build up production accordingly. This over-response results in excess stock. 

Conversely, if there’s a 7 per cent decrease in demand, supply chain partners could interpret it as a 30% decrease in demand and hamper production. Their underreaction results in shortages and stock-outs. It also can cause poor customer service if a supply chain partner does not believe there’s an adequate amount of business. 

The best thanks to considering the bullwhip effect is to imagine the movement of a bullwhip. the littlest flick of the handler’s wrist results in large waves along the length of the whip.

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So, what causes the initial motion?

Sometimes it’s as simple as a supplier receiving an order that’s smaller than usual without much context. If the customer doesn’t provide evidence (e.g., seasonal demand changes) then the supplier may assume there’s a requirement problem and overreact. 

In other cases, suppliers make assumptions supported market conditions or what they’re hearing from other suppliers. 

What this shows is that provide chain partners can enjoy supply chain visibility. If they know that you simply, because the retailer or the warehouse, will provide an identical level of transparency throughout the method, it’s a win-win situation. They don’t need to guess and underreact or overreact to fluctuations in demand. 

Install Automated Systems to Facilitate the straightforward Transfer of data 

Another way to enhance the likelihood of supply chain cooperation is to form the sharing of data as easy as possible. With the proper systems, sharing information with suppliers (and receiving information in return) doesn’t need to be painful. 

First, your warehouse or retail operation must eliminate manual processes and implement automated replenishment systems as possible. the simplest thanks to doing that are thru an enterprise system, sort of a WMS that’s tied into your inventory management system. 

Then, your businesses can use information exchange systems, like electronic data interchange (EDI), to simply facilitate transactions together with your suppliers.          

You can see how important the trouble get supply chain visibility is in creating and maintaining your inventory replenishment strategy.

Collaborate With Stakeholders to make the simplest Stock Replenishment and Demand Forecasting Strategy

Demand forecasting and replenishment planning are one among the pillars of your inventory replenishment strategy. a requirement forecast uses historical data to form an informed guess about what proportion business you’ll receive within the future. 

An accurate demand forecast relies on good data so, if you’ve implemented a system that gives real-time inventory data, you’re off to an honest start. If you’re using static inventory data, you would like to form sure your data is cleaned up and up-to-date before using it for demand forecasting replenishment planning. 

The first rule of demand forecasting and replenishment planning is to prioritize data. people that have worked during a business for an extended time often believe gut feelings to work out order quantities. They justify this by saying, “I’ve worked here for 20 years, so I do know that…” While this institutional experience is extremely important (and puts numbers in context) it shouldn’t replace hard data. 

The next rule of forecasting and stock replenishment is to usher in as many stakeholders as possible. At a minimum, this could include your inventory managers, your sales team and even your suppliers and long-term customers, if you’ve got an open and transparent working relationship. 

Each of those stakeholders should bring their forecasts supported the historical data they need, whether it’s the sales team, the business department, or the manufacturing team. This collaboration is vital because albeit everyone within the business has access to an equivalent data (which isn’t always the case), they’re going to consider various factors supported their specialities.