Warehouse Replenishment in E-commerce

Introduction to Warehouse Replenishment

With mounting pressure from the competition related to faster order fulfillment, e-commerce businesses need good infrastructure to streamline, improve, and reassess their warehouse operations and management. Maintaining accurate inventory records and resources in their warehouse outlets is critical to ensuring the spontaneity of the supply chain.

Having too little inventory heightens the risk of the company being unable to fulfill customer orders. An overloaded warehouse leads to unnecessary costs and waste. Businesses need to implement the best warehouse replenishment practices to optimize their warehouse.

So, what is warehouse replenishment in supply chain management? Below is a detailed look at a primary step in the supply chain process.

Warehouse Replenishment

What is Warehouse Replenishment?

Warehouse replenishment defines the process of refilling a warehouse with regular products from several external sources. Warehouse replenishment typically works between a company and the associated vendors or suppliers. This is usually a short process involving a few steps depending on the company’s vendor or supplier relationship. 

Definition of Inventory Replenishment

While the term inventory replenishment may seem similar to warehouse replenishment, there is a subtle difference between the two processes. Inventory replenishment, also called stock replenishment, refers to moving inventory from its reserve state to primary storage. It typically refers to the controlled and regular movement of the inventory in the supply chain to a location that requires sufficient stock to fulfill the customer demand. 

Warehouse Replenishment

Benefits of Warehouse Replenishment System

The best warehouse replenishment practice can ensure the smooth operation of a business’s supply chain. Why should a company utilize a warehouse replenishment practice?

Helps identify the areas of improvement

An optimized warehouse management system allows a business to determine the areas of improvement like product storage, movement of the products, etc. 

Minimizes administration

An optimized warehouse replenishment process leads to an optimized backend procedure and lessens the time required for heavy administrative tasks. 

Flexibility and control

An automated warehouse management system provides flexibility and control over the warehouse tracking and allows the business to focus more on other related things like increasing the efficiency, improving the fulfillment process, etc.

Work according to the market demand

Demand forecasting is one of the fundamentals of warehouse replenishment. Better visibility of the warehouse and inventory helps a company meet the market demand more conveniently. A business can scale up or scale down its warehouse accordingly.

Prevents overstocking

Effective warehouse replenishment helps a business avoid storing unnecessary, unwanted stocks. Moreover, if the stock is perishable, it can lead to obsolete and unsold inventory with an increased chance of wastage. Moreover, Overstocking also leads to increased carrying expenses.

Lowers transportation expenses

Leveraging stock replenishment helps a business control transportation and logistics costs. Optimized replenishment practice provides better insights into the storage and helps a business avoid last-minute rush and scramble to fulfill the customer orders.
Warehouse Replenishment

Fundamentals of Replenishment

Replenishment is one of the crucial processes of supply procurement. While a warehouse replenishment practice helps a company optimize its supply chain in a positive direction, there are specific base components that can help a business implement the best methods to reap the best benefits.

The fundamentals of replenishment are:

  • Demand Forecasting: Demand forecasting is replenishment’s most basic yet influential component. A business can optimize and react quickly to changing market scenarios with a continuous forecast update. It enables a company to reveal the demand variance of the products in the present market and increase the accuracy of stock requirements in case of emergency variances. Effective demand forecasting helps synchronize store and market patterns effectively, leading to accurate replenishment ordering.
  • Lead Time Forecasting – Lead time refers to the total number of days required between an order placement and receipt generation. Lead time forecasting is just as crucial a component as demand forecasting. Lead time forecast helps understand the time needed for the upcoming orders to get fulfilled and how long ahead the future orders should be placed. Accurate predictions can reduce lead time variance and improve services and sales.
  • Order Cycle Analysis – The amount of time between receipts is called the order cycle. This helps a business determine the number of products needed to be stocked or preserved until the next expected receipt.
  • Service Level Goal Analytics – While an effective vendor compliance protocol can minimize the lead time variance, a business needs a way to profitably compensate for the ever-changing market demands with the demand forecast variance. A service level goal makes way for that compensation. Higher service level goals lead to higher sales opportunities.
  • Special Orders – Special Orders are the additional orders needed by a business on top of the regular replenishments to meet the demand. Special orders can also refer to specific orders for promotional activities, sales, new store openings, or transferring excess stocks from one location to another without extra warehousing space. With efficient replenishment teams, it becomes easier for a business to figure out a solution for the impending incremental needs and create a safe space for the process ahead of time.
  • Order Validity – Order validity refers to the ordering rules established by the suppliers and vendors. Truckloads, case packs, layers or pallets, shipments, items or order minimums, maximum orders, etc., come under Order Validity. An optimal replenishment solution provides profit-driven logic in this step. Using replenishment analysis, a company can develop promotions, pricing, and assortment strategies.
Warehouse Replenishment

Methods of Warehouse Replenishment

While there are several optimized approaches for pinpointing the best practices for the benefits of a business, a company can choose to implement replenishment methods based on its specifications. 

Some notable warehouse replenishment methods are:

  • Reorder Point Method – When a specific item in an inventory falls to a certain threshold point, reorder point method triggers replenishment against the specified product. A business can order fresh merchandise before the current stock drops below the minimum safety stock level.
  • Periodic Stock Replenishment Method – This method allows a company to review inventory levels at specified set intervals instead of regular replenishments. Businesses with larger capacity often use periodic stock replenishment depending upon demand forecast, low risk of stockouts, and warehouse capacity.
  • Top-Off Method – This method allows picking racks during downtimes or slow periods. This is a popular method practiced by distributors and retailers to ensure fast selling of the stock.
  • On-Demand Method – This method primarily works according to customer demand. Certain companies only tend to fill in according to the current orders to ensure enough stock is available to fulfill the market demand and avoid any demand fluctuations. 

Main Strategies for Replenishing Stock in the Warehouse

The ultimate aim of an effective warehouse replenishment is to prevent understocking of any products and being unable to complete an order process. While warehouse replenishment strategies can be optimized accordingly, here are three main basic ways a business can prevent any unwanted situations regarding replenishments.

In-Demand Stock Replenishment

Products that make up daily purchase orders are placed on the picking racks when replenishing demand Stock. This strategy is most helpful when the orders are prepared according to wave picking. In demand Stock Replenishment is continuously and dynamically adjusted according to each wave requirement and when the demand market is highly unpredictable and variable.

Minimum Stock Replenishment

This is a safe strategy to replenish the warehouse only when the minimum inventory levels are reached and are strictly necessary. This procedure lowers restocking trips, extra transportation costs, and low or no waste at all. 

Lean Time Replenishment

Lean Time Replenishment allows a business to avoid restocking steps before extracting the existing product. It is a highly flexible method that impacts the overall workflow. It leverages fluctuations in the supply chain activities in installing or restocking the picking racks, with a heavy turnover. 

Warehouse Replenishment

Warehouse Replenishment Best Practices

An efficient replenishment strategy ensures a company’s performance and ability to replenish its warehouse as needed. The best practices for seamless warehouse replenishment are:

  • Continuous monitoring and adjusting the replenishment approach – Continuous monitoring of data provides an insight into the different patterns and trends of the market. Businesses have a better opportunity to use the analysis for a better understanding and approach to future replenishment methods.

  • Formulating effective replenishment strategies – Replenishment strategies vary from business to business depending on various external factors like size, products, etc. Therefore each replenishment practice needs to be tailor-made to fit the needs of the warehouse supply and overall supply chain management.

  • Utilizing replenishment data – The best way to optimize warehouse management is by assessing the existing database. Accurate metrics allow a business to make better and more informed decisions and improve replenishment management.

  • Developing better end-to-end visibility – Warehouse or Inventory management is a complex network consisting of several stop points and people associated with it.

    Thus, to have an optimized replenishment strategy, it is equally essential to straighten communication and organization among all the teams associated with the same supply chain. This healthy practice also allows a business to accumulate extra information and details required for better understanding and improvement. 

Factors Impacting Warehouse Replenishment

Choosing the accurate replenishment model often leads to reliable and efficient warehouse operations. Yet there are certain factors a business should look out for which can affect the replenishment procedures. They are:

  • Inaccurate Forecasting – Fluctuations in the company forecast data often lead to the failure of a business to meet or exceed the demands, thus impacting warehouse replenishment.

  • Failure to Optimise Storage Space – If a warehouse is not optimized or maximized for efficiency, it negatively impacts the inventory levels. It can lead to Overstocking and wastage, thus impacting replenishment.

  • Poor Visibility – End-to-end visibility in a supply chain is critical in ensuring the efficiency of a company’s order fulfillment performance. Lack of communication or inaccurate information among the levels of supply chain management negatively impacts the supply chain as a whole. This causes delayed replenishments along with kinks in the further processes in a supply chain. 

How to Optimize the Replenishment Process

Warehouse Replenishment

Some of the most effective and efficient strategies to optimize Warehouse replenishment processes are:

  • Implementing a Real-Time Warehouse Management System – Real-Time Warehouse Management replenishment systems can automatically access and order at predetermined intervals to ensure a stable warehouse and inventory. Thus enabling a business to carry a seamless fulfillment process.

  • Analyze Predictive Analytics – Predictive Analytics helps a business estimate the total number of sales per day according to both demand and seasonality.

  • Monitor Fast Moving Inventory – If there are some products with known backorders and obvious demands, it is a safe practice to directly replenish the inventory from the receiving dock. Constant monitoring ensures the correct amount of stock every time.

  • Enhance Picking Accuracy – Implementing automated systems helps in accurate order picking and fewer errors. Automating the whole warehouse management system eliminates replenishment issues and restores spontaneity in the fulfillment activity.

  • Set Realistic Key Performance Indicators (KPIs) – Implementing realistic metrics allows a business to understand and analyze the numbers efficiently and keeps the employees motivated. Realistic KPIs are inspiring, challenging, and achievable. 
Warehouse Replenishment

Plan for Emergency Replenishment

With many complex networks working together in a warehouse management process, emergencies are inevitable despite an efficient warehouse management system. Thus, a business must plan for emergencies as well. The best strategy to handle emergency replenishment is to prepare an “if, then” plan in case of unwanted situations or natural disasters. A pre-planned solution will save valuable time and resources and prevent a small emergency from turning into a bigger picture.

Conclusion

Effective warehouse replenishment process is a critical element in any supply chain management strategy. It ensures that the companies, vendors, and suppliers have the exact or required amount of inventory to meet the order demands while minimizing excess stock. Automated systems help a business manage the complexities more easily while increasing productivity and profitability.

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FAQs

Warehouse replenishment refers to the process of reordering and stocking when the inventory levels are low. It is a process to ensure spontaneity in the supply chain process. 

Analyzing the market demand forecasting and appraising ideal stock levels, a company can either choose to replenish its inventory periodically or on-demand. 

The warehouse replenishment process helps the business maintain the right amount of stock to meet the market demand and customer orders. Effective warehouse management also helps in minimizing extra expenses for a company by eliminating obsolete steps or processes from the supply chain management. 

Factors affecting an efficient Warehouse replenishment are:

  • Inaccurate Demand Forecasting
  • Lack of Warehouse Optimization
  • Overstocking
  • Lack of database and monitoring.

Effective warehouse replenishment practices include

  • Maintain visibility in the supply chain
  • Implement automation
  • Continuous monitoring and evaluation
  • Choosing the accurate method
  • Building good supplier relationship

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