Stock replenishment is the decision you make over and over: when to reorder an item, and how much to bring in. Get the timing and quantity right and stock quietly stays available without piling up. Get them wrong in either direction and you pay, through lost sales or through cash frozen on shelves.
What replenishment actually decides
Two numbers do most of the work:
- The reorder point answers when. It is the stock level at which you place a new order, calculated so that what is left covers demand during the supplier’s lead time, plus a safety buffer for the variation in both.
- The order quantity answers how much. It trades the cost of ordering often (admin, freight, receiving) against the cost of holding more (cash, space, obsolescence).
Reorder point = (average daily demand × lead time in days) + safety stock. The safety stock term is what absorbs the days demand runs hot or the supplier runs late. Set it from your target service level, not from a gut feel.
The main replenishment methods
- Reorder-point (continuous review). Watch stock continuously; when it hits the reorder point, order a fixed quantity. Simple and responsive, and the default for most operations running a real-time stock ledger.
- Periodic review. Check stock on a fixed schedule and top up to a target level. Easier to coordinate with supplier order days, but you carry more safety stock to cover the longer gap between reviews.
- Demand-driven / min-max. Hold between a minimum and a maximum, reordering to the max when you hit the min. A practical middle ground used widely in distribution.
Which one fits depends on how you track stock and how your suppliers want to receive orders. The method matters less than feeding it accurate numbers.
Where replenishment goes wrong
- Stale demand inputs. A reorder point built on last year’s demand overstocks a declining item and starves a growing one. Refresh the inputs as the demand forecast moves.
- Ignoring lead-time variability. Using an average lead time but not its variability is the most common cause of “we reordered on time and still stocked out.”
- A wrong stock record. Replenishment math is only as good as the on-hand figure feeding it, which is why inventory control and counting discipline sit underneath all of this.
How to improve it
Start by separating your items by value and velocity, then apply tighter, more frequent replenishment to the fast, high-value lines and a simpler rule to the long tail. Tie the safety stock to a stated service-level target so the buffer is a decision, not an accident. Replenishment is one of the highest-leverage inventory management habits because you run it constantly: small, consistent improvements compound across every reorder.