What is Stock Replenishment? A complete guide

Here we are again to discuss some more important things about the Inventory management system, and this time we will be discussing what is Stock Replenishment.

Stock replenishment is one of the key terms included in the inventory management system, which helps us to improve our inventory management strategy.

This short article will help you to understand some important things about Stock Replenishment, but before that, you must be familiar with the said term.

It is one of the most important aspects of an inventory management system, as it plays an important role in effectively managing the inventory levels and keeping the inventory costs lower along with taking care of customer satisfaction.

What is Stock Replenishment?

Stock Replenishment is a standard method that ensures that the right products are at the best place in the most optimum quantity. 

Or let us make it more elaborative – it is the rate at which the inventory travels along the supply chain, starting from the manufacturer to the suppliers, which follows the sequence of warehousing – shipping and delivery at the desired location. 

Stock replenishment aims to keep the inventory flowing through all these steps and maintain an efficient order rate while preventing costly inventory overstocking.

As the word replenish means filling up again or restoring the stocks, such can be done through automation using IoT devices, which can be beneficial to avoid stock-outs.

Every modern retailer today has a demand of distributing their stocks dynamically with 100% accuracy. Retailers must be able to relocate the stocks quickly between different locations, such as warehouses, stores, franchises along with keeping a healthy stock behind in the inventory.

For such dynamic needs, some dynamic solutions have been created which offers the following benefits – 

Optimized Sales –

Here you order the right number of products to be delivered to the right place in the stipulated time. With such an optimum sales method you can achieve the optimum inventory levels on all of your desired products to sell effectively.

Reduced mark-downs –

When you optimize the stock levels to fulfil the customer’s demand with fewer stock-outs. With such mark-downs, the margins are protected and profits can be soared by proper replenishment method.

Maximize stock turn –

By implementing this method you can prevent over and understocking of your inventories, as both these can affect the profitability of a business and you can fulfil your customer’s demand without affecting your inventory levels.

When it comes to stock replenishment, it was very tough to manually track every stock movement in the supply chain through spreadsheets. Today, due to automation, stock replenishment has become easier with the intelligent inventory management system which monitors stock movements in real-time without manual intervention.

There are two important principles for Stock Replenishments that can help for proper stock management, which are – Safety Stock and Reorder Point.

Safety Stock – 

Safety Stock is a logistical term used to describe the extra level of stocks that are maintained to counter the risk of stock-outs, which are a result of the uncertainties in the supply & demand chain.

Benefits of Safety Stock 

• Prevents running out of stock for your highly in-demand products
• Protects your business deliverables from sudden deficits in supply and demand 
• Offers flexibility in the process of ordering products and raw materials
• Prevents losing of customers to competitors

Reorder Point – 

Stock replenishment usually gets activated when the stocks or inventory levels reach a point when there is a need to restore the stocks or we can say the re-order point.

The re-Order point is the point in the inventory system at which the stocks are needed to be re-ordered in order to fulfil the demands of the customer. It also takes the account of how much time it will take for a supplier to cater for the new order. 

Calculating the Re-order point manually comprises of three steps, viz.-

1. Calculating lead time in days
2. Calculate the safety stock in days
3. Sum up the calculated lead time and safety stock to find the re-order point.

This is how safety stock and re-order point plays an important role in the stock replenishment process for an effective inventory management strategy.

So, this is all about stock replenishment which we have discussed in this short article, there is certainly more to understand, but the information in this article is ample for you to get going your inventory management system on a positive note.

To learn more about inventory management systems you can log on to ZapInventory and learn about every aspect of the inventory management system.