Control inventory replenishment and say "goodbye" to out-of-stocks and overstocking

The success of a business, whether offline or online, depends on a multitude of factors. But there are two that clearly make the difference: customer satisfaction and financial equilibrium.

One process has a significant influence on both: inventory replenishment. Mastering this operation means having the right quantity of merchandise in your warehouses, at the right time, to prevent shortages that annoy the consumer. But also to avoid overstocking , which is synonymous with loss of money.

To achieve this happy balance, you can rely on different replenishment methods, but also on tools that clearly make a difference.

Check out all the great tips we've got in stock at Appvizer. 👉

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What is stock replenishment?

To start with, a quick look at the definition of stock replenishment. 🔎

Inventory replenishment refers to all the actions involved in renewing the merchandise needed to keep a business running smoothly.

Production, management of your warehouses, goodwill in your physical stores... the success of your business largely depends on controlled replenishment management. Your objective? Maintain an optimal level of available products to meet customer demand, without generating overstocking.

Of course, each company adapts its strategy according to its activity, suppliers and logistical constraints. An e-tailer doesn't have the same imperatives as a supermarket!

💡 Worth knowing: stock replenishment differs from shelf replenishment. While the former concerns warehouses and reserves, the latter defines the transfer of products from these reserves to the shelves accessible to customers.

How important is optimal stock replenishment? The 2 key benefits

The importance of good stock replenishment can be seen in the following two areas:

• customer satisfaction, in terms of access to the desired products within a reasonable timeframe;
• financial equilibrium, by reducing overstocking, among other things.

Let's take a closer look. 👉

Guaranteeing customer satisfaction

Being able to deliver or supply, within a reasonable time, the product desired by the customer, is to some extent the basis of any efficient business. Especially at a time when consumers are becoming increasingly volatile!

Indeed, if the item they're looking for is reported "out of stock", they won't hesitate to see if the competition is doing better. What's more, their dissatisfaction is likely to damage your brand image.

☝️ You therefore need to deploy a stock replenishment strategy that prevents out-of-stock situations not only to close more sales, but also (and above all!) to win the loyalty of customers who know they can count on you.

Ensuring financial equilibrium

To avoid the stock-outs mentioned above, some companies are tempted to order large quantities of products. The problem is that this leads to costly overstocking.

And for good reason: overstocking :

• ties up working capital, since the money invested in inventories can no longer be used for other strategic needs such as innovation, marketing or business development;
• jeopardizes the "freshness" of products, at the risk of rendering them unsellable in the case of perishable goods, or items subject to obsolescence, trends, etc.

In addition, poorly managed stock replenishment compromises operational efficiency within warehouses, and contributes to higher shipping costs due to split shipments (you're forced to multiply partial deliveries).

What are the different inventory replenishment strategies?

When to replenish?

This is the question all retailers ask themselves, and the answer depends on the methodology they choose. And there are lots of them!

Generally speaking, these strategies fall into two main categories:

• push methods (supply in advance): stock is ordered in advance, based on forecasts;
• pull methods (supply on demand): we only replenish stock when demand is real.

The continuous inventory replenishment method

This is probably the best-known pull method. How does it work? An order is triggered as soon as a product reaches a critical threshold (reorder point).

This process is based on real, more immediate needs. It is therefore recommended if your demand is stable, and if you can set up a safety stock.

However, this strategy requires precise monitoring and sometimes generates high logistics costs due to frequent orders.

The calendar method

This simple replenishment method involves ordering the same quantity of products on a fixed date, irrespective of stock levels.

As you can see, this is a push (i.e. proactive) approach, based on predictions drawn from your experience and your various tools.

You'll appreciate the practicality of the calendar strategy if your demand remains stable.

Beware, however, of the risk of disruption when the number of orders suddenly explodes due to unanticipated factors. Remember the shortages of toilet paper 🧻 or hydroalcoholic gel at the start of the Covid crisis!

The replenishment method

This is similar to the previous strategy (fixed-date ordering), with the difference that stock quantities are adjusted according to "holes". You don't order a fixed number of products.

The catch: this method is based on past sales, not on prediction. This means it will be difficult to cope with an unforeseen increase in demand.

The just-in-time (JIT) method

This pull technique involves replenishing supplies only when demand is real. Here, it's important to perfectly synchronize customer orders, suppliers, production and distribution.

While JIT is appreciated for its ability to reduce storage costs and waste, it depends on an ultra-reliable supply chain. A supplier delay = an immediate shortage.

The forecast replenishment method

Predictive replenishment is based on the study of various analyses, with the aim of building up the necessary stocks in advance. Instead of waiting until a product is almost sold out before launching a purchase order, the company :

• examines consumer trends (sales history, market behavior, etc.) ;
• takes into account external events (marketing campaigns, sales periods, economic changes, etc.) ;

to adjust its orders accordingly.

Such a method involves the use of powerful tools, integrating Big Data and artificial intelligence technologies. But beware, these forecasts can sometimes be unreliable due to unforeseen changes!

The top-off method, based on lead time

Finally, the top-off method is a pull approach based on lead time. It aims to replenish stocks before they reach a critical level, while avoiding an excess of unnecessary goods.

What's the difference with the order point strategy, you may ask? Unlike methods that trigger an order at a fixed threshold, the top-off approach adjusts replenishment according to two factors:

• the time required to receive a new delivery;
• the average consumption of the product during this time.

This strategy is particularly popular with companies where replenishment is time-consuming, and where stock-outs are costly. On the other hand, it requires perfect control of supplier lead times.

👉 The different replenishment methods in video :

Establish a clear process and responsibilities

The key to successful inventory replenishment is knowing who does what, and when.

• Who approves orders?
• Who monitors stock levels?
• Who manages relations with suppliers?

This is all the more true when you operate with different entities, such as several physical stores. In this case, should you opt for centralized supply chain management? Or should each outlet be given greater autonomy and decision-making power?

In reality, it all depends on the company's structure and volume of business. But you should know that the first option standardizes processes, thereby optimizing costs, while the second promises greater responsiveness.

☝️ Whichever model you choose, always draw up procedures that are clear, accessible and known to all.

Act according to the product

If you sell a variety of goods, you'll probably need to act differently for each one.

This applies in particular to

• perishable goods, which require special procedures if you don't want to end up throwing away kilos of product;
• fast-moving items, which need to be restocked more frequently.

We also recommend that you prioritize your merchandise, with a view to paying particular attention to those that generate the most value, in terms of profits for example.

Optimize supplier relations

Smooth inventory replenishment relies on reliable, responsive suppliers who deliver the right goods on time.

We therefore advise you to :

• maintain an optimal, win-win relationship with your best partners;
• regularly monitor their performance (lead times, order compliance, etc.) to act quickly in the event of any deterioration in service quality.

💡Tip : diversify your sources of supply. A company should never depend on a single supplier, or risk finding itself in difficulty if production breaks down or logistics are delayed.

Rely on reliable, up-to-date data

In reality, inventory management is all about data.

Since the operation requires precision, the ability to anticipate, but also the ability to read the present, you need to rely on reliable data that is updated in real time. After all, working with obsolete data inevitably leads to ordering errors, stock-outs or overstocking.

💡Tip : set up a dynamic dashboard, structured around key indicators that will enable you to become both more responsive and profitable.

Which tools for inventory replenishment?

In the final analysis, following the best practices outlined above very often goes hand in hand with the use of tools dedicated to inventory management and replenishment.

All the more so for large organizations, or those with a complex structure (several entities to manage, for example). In such cases, it's difficult to work with a simple Excel file!

A supply and inventory management solution helps you to :

• monitor stock levels in real time ;
• trigger automatic replenishment from suppliers;
• analyze consumer trends.

🛠️ Software such as Expansio comes to mind, a WMS designed to manage warehouses and stocks for companies, even those with several sites. In terms of functionality, it guarantees precise tracking of goods, as well as real-time visibility on the status of your inventory, thus avoiding stock-outs and overstocking. Thanks to its integration with ERP systems, Expansio ensures smooth synchronization of supply flows. What's more, this solution boasts real analytical firepower : perform predictive analyses of your logistics needs... and anticipate even more!

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Inventory replenishment FAQs

What's the difference between procurement and replenishment?

Procurement refers to the entire process of acquiring the goods needed to run a business. It includes choosing suppliers, managing orders and organizing incoming flows.

Replenishment, on the other hand, takes place after initial stocking. It consists of renewing products according to sales and forecasts.

How do you choose the best replenishment method?

It all depends on your business and the nature of the products you manage.

A company with stable demand will prefer periodic or forecast replenishment, based on sales estimates.

If demand fluctuates sharply, it's best to opt for a just-in-time or top-off strategy.

In some cases, a combination of methods can be used to optimize the process and avoid unnecessary costs.

What are the key indicators to monitor for successful replenishment?

Various logistics KPIs will support you in steering your inventory management.

For example, the

• the turnover rate indicates the speed at which a product is sold and renewed;
• the coverage rate measures the length of time current stock can satisfy demand;
• the shortage rate measures the impact of stock shortages on sales;
• the cost of storage helps to adjust quantities ordered to avoid financial losses.

🤩 Armed with all these tips, all that's left to do is choose the inventory replenishment method that's right for you, to keep your costs under control while making your brand a sure bet for discerning consumers!