A Comprehensive Guide to Demand-Driven Inventory Replenishment Planning

A solid inventory replenishment planning strategy is significant to businesses because it can help teams avoid costly supply chain issues like out-of-stocks or overstocks. Out-of-stocks not only lead to lost sales but can even be a significant hit to customer loyalty and trust in an exceedingly brand. They can also jeopardize your security on the shelf, as neighboring brands may begin to encroach on any space.

On the opposite hand, overstocking is often equally problematic for your business. To begin with, CPG companies understand that excess inventory can stymie new product launches and brand redesigns and, in the case of food and beverage brands, can push products past their "sell by" date, rendering them unfit for purchase. Furthermore, overstocking can confuse the supply chain. If there's a lapse in communication about any backstock before an order for replenishment is placed, both brands and retailers could suffer losses in managing the overstock.

How does inventory replenishment planning work in practice? 

Depending on the unique structuring of your business, a team is going to be compiled to oversee replenishment planning. Usually, these teams encompass the warehouse managers and/or planners who specialize in ensuring that the corporation has enough stock to supply goods and/or fulfill orders.

These groups can be divided into a range of specializations, with some focusing on inventory ordering methods as the firm grows and evolves, and others dealing with the short-term; the latter are the specialists who keep track of inventory counts.

When the counts drop to the pre-proposed re-order point, the designated team will contact the relevant parties within the availability chain to replenish the things. Remember, this happens with both ready-to-sell inventory and raw materials direct from the supplier.

Every competent warehouse has its own set of replenishment rules. Typically, these are somewhat moveable, reckoning on the severity of the case, but they're usually written after a requirement forecast is produced.

Factors that influence how inventory is replenished

Suppose you ask any experienced warehouse manager, planner, or product manager about stressful events in warehouses. In that case, they will almost certainly say that when inventory replenishment plans fail, stress levels can quickly rise. All competent warehouses have replenishment strategies, but this does not guarantee that each plan will cover every unanticipated circumstance — inventory replenishment factors to consider.

Let's take a look at some of the most important variables that affect the replenishment plans of even the most capable warehouses:

Your company's forecast has changed

Because all predictions include unverified demand, there's no way to know how much the numbers will shift to meet buyers' changing needs. Another difficulty could arise if one of your suppliers encounters a problem and your organization cannot obtain equivalent raw materials in time to ensure uninterrupted manufacturing.

Your warehouse space is inefficient

Warehouse space usage is a significant source of disagreement among warehouse managers and planners. A planner might want to set aside "x" space for storing excess goods or raw materials. The agreed-upon inventory replenishment plan cannot be fully utilized if the warehouse manager cannot supply the necessary space.

Your overall visibility is low

When it comes to supply chain efficiency, end-to-end visibility is the game's name these days. The restocking process can be delayed when you don't give your suppliers precise, real-time information about your current stock levels.

Best Practices for inventory planning and replenishment 

Follow these recommended practices to ensure that your company's inventory planning and replenishment can constantly be replenished as needed: 

Use Data on Replenishment

You probably won't be surprised to learn that leveraging data to help you make better, more educated decisions is one of the most acceptable ways to optimize your inventory management. Data from your retail outlets' point of sale might indicate how your replenishment process should work. Because each of your accounts is unique, carefully managing the data will help you maintain them all stocked to the appropriate level.

Create stocking level techniques that work

Stocking level plans differ depending on the size and specialization of the company; therefore, you must tailor yours to your inventory and supply chain's needs. If you're beginning from scratch with your strategy, ensure that everyone involved, especially your long-term clients and suppliers, is aware of your most stringent goals. Only then can you talk about stocking level techniques in terms of complex numbers.

Examine and re-evaluate your forecast

Include everyone in this conversation, from your planners to your sales team, warehouse management, suppliers, long-term clients, etc. Before the meeting, make sure your colleagues have their forecasts ready to compare to the specific aspects that affect your company's replenishment strategy. When you're there, make a realistic strategy if and when your current replenishment plan and/or forecast fail.

Related: Toy Store Boosted Revenue with Demand Forecasting Software

Improve visibility from beginning to end

Do your homework to ensure that your supply chain is aware of your shifting stock levels. Allow space in this system for further information about your fleet's shipment schedules.

Monitor and tweak your replenishment strategy

You'll be able to use the information to better plan for the future as time goes on and your team notices distinct patterns and trends arising from in-store data. Incorporating your inventory replenishment strategy into a continuous improvement cycle can help you pinpoint what is working and what needs to be changed. Your lead time projections will be affected if your distributors have been late with deliveries. It's necessary to adjust your demand projections if your product sells more or less than you expected. It's not enough to merely collect data; you must constantly iterate and improve your process using your resources.

As you can see, many of the issues in replenishing revolve around communication, management, and accurate forecasting. Keep your numbers flexible and realistic, so your organization never needs to deal with an out-of-stock or overstock of inventory.

Are you interested in replenishment planning software?

We propose the Leafio platform. It is replenishment planning software for the retail supply-chain processes automation and optimization: inventory, merchandising, and promotion management. The business value we create:

• higher sales;
• improved turnover;
• eliminating financial losses;
• efficient execution;
• optimized replenishment;
• trade promotion forecasting;
• merchandising management.

AI-powered solution for building an efficient system of inventory management

Explore the LEAFIO

We provide full-cycle services for retail companies, including business process consulting, software integration, personnel training, piloting, and dedicated customer success at the best price on the market.

Let's talk about the best option for you. Contact us right away.