Top 5 Ways to a Improve your Replenishment Planning

Top 5 Ways to a Improve your Replenishment Planning

Inventory replenishment is an essential practice that every business should incorporate into their plans. It is vital to ensure your business can fulfill consumer demand at the right time. Proper inventory management helps to reduce business expenses in several ways. It helps to allay the additional cost of storing, heating, and refrigerating an excess inventory and ensures that money is not locked up in slow-moving inventory. 

Let us now have a detailed view of what inventory replenishment is and how you can achieve the best practices for your inventory to maximize profits?

What is Inventory Replenishment?

Inventory planning and replenishment ensure the smooth flow of goods along the supply chain to maintain an optimal stock level for meeting demand at the right time. Effective inventory management allows businesses to achieve order fill rates and keeps the inventory carrying cost in check. It can be done effectively through accurate demand forecasting by considering historical sales data, seasonality, trends in customer behavior, and other factors influencing demand. Accurate demand forecasting results allow you to decide when to reorder items while considering the lead times.  

Best Practices for Inventory Replenishment

An organization that maintains an inventory should avoid stockouts and backorders as it leads to losses, not only in terms of money but also hampers the brand reputation. For manufacturers, without proper inventory management, there can be delays in production due to a shortage of raw materials. For retail businesses, it can result in lost sales due to stockouts. Being unable to fulfill orders timely can damage your reputation. 

On the other hand, having excess inventory can increase costs and minimize profit margins, and it can also affect the cash flow as the cash gets tied up in dead inventory. Professional businesses have effective inventory planning and replenishment practices to confirm that the right inventory is present all the time and that replenishment orders are placed immediately as the reorder point is reached. An effective stock replenishment policy can help manage different supplier lead times, ensure accurate demand forecasting, prevent stockouts, maintain the required safety stock levels, prevent extremes of stock – overstocking and understocking, and work with min/max order levels.   

Businesses can resort to efficient practices for proper inventory replenishment and maintain an optimal stock level to satisfy customers by fulfilling orders fast. 

Get the Accurate Balance of Inventory

Managing inventory is a significant aspect of making profits. Businesses need to have enough stock to meet the forecasted demand but not in excess quantities of inventory as it might lock up your resources in slow-moving goods. Moreover, the highly demanded products should be placed in the most frequented places in the warehouse, and the slow-moving goods should be shifted elsewhere to enhance the picking process and fulfill orders quickly. You should decide which items have greater demand and thus need reordering. It can be done through the ABC analysis model for categorizing the inventory. Here is what A B C items stand for:

  • A Items – These items are in high demand and are profitable to the business as they sell well. 
  • B Items – These items have mid-range value and less demand than A.
  • C Items – These items are the least important and have low demand.  

Businesses ensure that they primarily focus on A items for maximum availability and then consider the B and C items. ABC classification is simplistic, but other models consider pick frequency, demand volume, profitability, and volatility. With this, you can group your SKUs into meaningful matrixes and form inventory planning and replenishment policies accordingly. You can stock the right items to meet demand by utilizing demand factors. It also helps to prevent investing in risky items that may not sell and lead to obsolete inventory. 

2. Inter Store/Warehouse Transfer 

Substandard inventory replenishment policies can result in overstocking of products that have little demand. Businesses might later be forced to sell this stock at discounted prices, affecting their profitability. It is better to take action before the stock becomes obsolete.

  • Businesses need to comprehend and identify the healthy, obsolete, and excess stock and then identify ways to minimize the excess stock, such as lessening the reorder quantities, altering the reorder point, and utilizing the marketing campaigns to increase demand. 
  • If your business maintains inventory across different locations, you need to have visibility of SKU levels, and you can redistribute items in different locations. You can shift excess items from one location to another where the stock is low. Placing high-demand items in the proper locations can minimize overstocking and free up working capital. 

3. Set Achievable Service Level Targets

High service levels allow you to fulfill orders and guarantee customer satisfaction. Industries that sell goods with high demand need high service levels, but in industries where the demand is fluctuating, you do not need to maintain high service levels. For establishing high service levels, your inventory needs to have high volumes of each product, but this is not a feasible option. The alternative is to modify your replenishment policies and set achievable service level targets.

4. Smart Inventory Policies

Inventory purchasing teams should purchase goods at the lowest possible price to maximize profits. You should also consider questions such as how fast the order is required, whether buying in bulk offers better discounts, and what is the best method of filling orders? You should consider lead times, suppliers’ discounts, and min/max order quantities. 

5. Automate Your Inventory Replenishment

The inventory replenishment processes mentioned above aim to increase revenue, and there are different things to cover. Therefore, more and more businesses are adopting inventory replenishment software which helps to automatically generate statistical demand forecasts, optimize stock for different locations, categorize inventory and comprehend which stock to carry more, measure reorder points, and suggest daily ordering schedules. The software also helps cut costs and maximize productivity and sales by maintaining higher service levels to ensure customer satisfaction. 

About Us

Fountain9 is a Y Combinator backed company, which offers predictive inventory planning and optimization software for e-commerce, DTC and retail companies. Fountain9 helps businesses to predict demand accurately and maintain optimum inventory levels. Their AI-powered software, Kronoscope helps to analyze various factors that influence demand and considers factors such as lead times and min/max order quantities to manage inventory replenishment effectively. 

Our flagship product, Kronoscope uses AI to accurately predict future inventory imbalances which lead to out of stock situations or wastage, and also recommends best ways of minimizing their impact.

Kronoscope is powered by state of the art demand sensing and pricing engine which takes into account several factors like historical sales trends, seasonality, holidays, markdown events and pricing changes to predict future inventory requirements and optimize prices. Predicted inventory demand is also aligned with supply side data to identify ideal suppliers and replenishment quantities that minimize chances of stock outs or inventory wastage.


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