Whether losing sales to out-of-stocks, or facing overstocking costs and markdowns, inefficient stock replenishment has a huge impact on a retailer’s GMROI. Meeting sales demand has always been challenging, effective replenishment should mitigate issues that arise from poor planning and allocation. Modern consumer expectations of inventory availability and fast order fulfillment mean that it is even more important for retailers to have a good stock replenishment process in place. Before we get into the strategies and the best practices of stock replenishment, let’s define its key facets.Which strategy is right for you? The right process must serve your specific business needs. However, there are best practices that a good replenishment strategy should be able to implement.
What is replenishment?Stock replenishment is the process of ordering and allocating inventory to replace missing products on store shelves. Replenishing stock is a key facet of inventory management which helps to balance inventory levels during a selling period.
What is replenishment stock?Replenishment stock simply refers to the inventory that is ordered after a selling period has already begun.
What is replenishment effectuating?Once a selling period is underway consumer demand begins to affect the inventory levels across the business: In one location there may be an unexpected spike in demand for red sunglasses which quickly sell out, meanwhile in another location those same glasses lay stagnant on the shelf. Replenishment seeks to ensure that the right product is on the shelves at the right time for the consumers to maximize sales & minimize costs.
What is replenishment time?Replenishment time is the time between initially placing a replenishment order, and the replenishment stock hitting the shelf. The longer the replenishment time, the higher the cost. In order to shorten replenishment time, the best medicine, as is often the case, is prevention. Of course, this is easier said than done. There are multiple factors and variables to account for and stay ahead of. Common factors include:
- Manufacturing time
- Packaging and shipping time
- Lead time
- Processing time at the warehouse
- Customer order fulfillment