Control stock replenishment and say goodbye to out-of-stocks and overstocking

The success of a business, whether online or offline, depends on a multitude of factors. But there are two that clearly make the difference: customer satisfaction and financial balance.

There is one process that has a significant influence on both: stock replenishment. Controlling this operation means having the right quantity of goods in your warehouses, at the right time, to prevent stock-outs that annoy consumers. But also to avoid overstocking , which is synonymous with losing money.

To achieve this happy balance, you can rely on different replenishment methods, but also on tools that clearly make a difference.

Check out all the great tips we've got in stock at Appvizer. 👉

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What is stock replenishment?

To start with, a quick look at the definition of stock replenishment. 🔎

Stock replenishment refers to all the actions involved in renewing the goods needed for a business to run smoothly.

Production, management of your warehouses, goodwill in your physical shops... the success of your business depends largely on controlled replenishment management. Your objective? To maintain an optimum level of available products to meet customer demand, without generating overstocking.

Of course, each company adapts its strategy according to its activity, its suppliers and its logistical constraints. An e-tailer does not have the same imperatives as a supermarket!

💡 Worth knowing: stock replenishment differs from shelf replenishment. While the former concerns warehouses and reserves, the latter defines the transfer of products from these reserves to the shelves accessible to customers.

How important is optimal stock replenishment? The 2 key advantages

The importance of good stock replenishment can be seen in the following two areas:

• customer satisfaction, by ensuring that customers have access to the products they want within a timeframe that is deemed reasonable in the circumstances;
• financial equilibrium, by reducing overstocking, among other things.

Let's look at this in more detail. 👉

Guaranteeing customer satisfaction

Being able to deliver or supply, within a reasonable time, the product desired by the customer is to some extent the basis of any efficient business. Especially at a time when consumers are becoming increasingly volatile!

If the item they're looking for is reported to be "out of stock", they won't hesitate to go and see if the competition is doing better. Not to mention the fact that their dissatisfaction is likely to damage your brand image.

☝️ You therefore need to deploy a stock replenishment strategy that prevents out-of-stock situations in order to close more sales, but also (and above all!) to win the loyalty of customers who know they can count on you.

Ensuring a sound financial balance

To avoid the stock-outs mentioned above, some companies are tempted to order large quantities of products. The problem is that this leads to costly overstocking.

And for good reason, overstocking :

• ties up working capital, since the money invested in stocks can no longer be used for other strategic needs such as innovation, marketing or business development ;
• jeopardises the 'freshness' of products, at the risk of rendering them unsellable if they are perishable, or items subject to obsolescence, trends, etc.

In addition, poorly managed stock replenishment compromises operational efficiency within warehouses, and contributes to an increase in shipping costs due to split shipments (you are forced to multiply partial deliveries).

What are the different stock replenishment strategies?

When should you restock?

This is the question that all retailers ask themselves, and the answer depends on the methodology they choose. And there are lots of them!

As a general rule, these strategies fall into two main categories:

• push methods (advance supply): stocks are ordered in advance, based on forecasts;
• pull methods (supply on demand): stocks are replenished only when demand is real.

The continuous inventory replenishment method

This is probably the best-known pull method. How does it work? An order is triggered as soon as a product reaches a critical threshold (reorder point).

This process consists of relying on real, more immediate needs. It is therefore recommended if your demand is stable and if you have the possibility of setting up a safety stock.

However, this strategy requires precise monitoring and sometimes generates high logistics costs due to frequent orders.

The calendar method

This very simple replenishment method involves ordering the same quantity of products on a fixed date, regardless of stock levels.

As you will have realised, this is a push (i.e. proactive) approach, based on predictions drawn from your experience and your various tools.

You will appreciate the practicality of the calendar strategy if your demand remains stable.

Beware, however, of the risks of disruption when the number of orders suddenly explodes due to unforeseen factors. Remember the shortages of toilet paper 🧻 or hydroalcoholic gel at the start of the Covid crisis!

The replenishment method

This is similar to the previous strategy (fixed-date ordering), with the difference that the quantity of stock is adjusted according to the "gaps". You don't order a fixed number of products.

Here's the rub: this method is based on past sales, not on prediction. It will therefore be difficult to cope with an unforeseen increase in demand.

The just-in-time (JIT) method

This pull technique consists of restocking only when demand is real. Here, it is important to synchronise customer orders, suppliers, production and distribution perfectly.

While JIT is appreciated for its ability to reduce storage costs and waste, it depends on an ultra-reliable supply chain. A supplier delay = an immediate shortage.

The forecast replenishment method

Predictive replenishment is based on the study of various analyses with the aim of building up the necessary stocks in advance. Instead of waiting until a product is almost sold out before issuing a purchase order, the company :

• examines consumer trends (sales history, market behaviour, etc.) ;
• takes into account external events (marketing campaigns, sales periods, economic changes, etc.) ;

to adjust its orders accordingly.

This method requires the use of powerful tools, incorporating Big Data and artificial intelligence technologies. But beware: sometimes these forecasts are unreliable because of unforeseen changes!

The top-off method, based on lead time

Finally, the top-off method is a pull approach based on lead time. It aims to replenish stocks before they reach a critical level, while avoiding an excess of unnecessary goods.

What's the difference with the order point strategy, you might ask? Unlike methods that trigger an order at a fixed threshold, the top-off approach adjusts replenishment according to two factors:

• the time taken to receive a new delivery;
• the average consumption of the product during this time.

This strategy is particularly popular with companies where replenishment takes time, and where stock-outs are costly. On the other hand, it requires perfect control of supplier lead times.

👉 The different replenishment methods in video:

Establish a clear process and responsibilities

To ensure that stocks are replenished correctly, you first need to know who does what, and when.

• Who approves orders?
• Who monitors stock levels?
• Who manages relations with suppliers?

This is all the more true when you operate with different entities, several physical shops for example. In this case, should you opt for centralised management of the supply chain? Or leave more autonomy and decision-making power to each outlet?

In reality, it all depends on the structure of the company and its volume of business. But you should know that the first option standardises processes, thereby optimising costs, while the second promises greater responsiveness.

☝️ Whichever model you choose, always draw up procedures that are clear, accessible and known to everyone.

Act according to the product

If you sell a variety of goods, you will most likely need to act differently for each one.

This applies in particular to

• perishable goods, which require a special procedure if you don't want to end up throwing away kilos of products ;
• fast-moving items, which are restocked more frequently.

We also recommend that you prioritise your goods, with a view to paying particular attention to those that generate the most value, in terms of profits for example.

Optimise relations with suppliers

Smooth stock replenishment depends on reliable, responsive suppliers who deliver the right goods on time.

We therefore advise you to :

• Maintain an optimal, win-win relationship with your best partners;
• regularly monitor their performance (lead times, compliance with orders, etc.) to act quickly if service quality deteriorates.

💡Tip : diversify your sources of supply. A company should never be dependent on a single supplier, otherwise it could find itself in difficulty if production breaks down or there are logistical delays.

Rely on reliable, up-to-date data

In reality, stock management is all about data.

Since the operation requires precision, the ability to anticipate, but also the ability to read the present, you need to rely on reliable data that is updated in real time. Because working with out-of-date data inevitably leads to ordering errors, stock-outs or overstocking.

💡Tip : set up a dynamic dashboard, structured around key indicators that will enable you to become both more responsive and more profitable.

What tools should be used to replenish stock?

In the final analysis, following the good practices outlined above very often goes hand in hand with the use of tools dedicated to stock management and replenishment.

All the more so for large organisations, or those with a complex structure (several entities to manage, for example). In these cases, it's hard to work with a simple Excel file!

A supply and stock management solution will help you to :

• monitor stock levels in real time ;
• trigger automatic replenishment from suppliers;
• analyse consumer trends.

🛠️ Software such as Expansio comes to mind, a WMS designed to manage warehouses and stocks for companies, even those with several sites. In terms of functionalities, it guarantees precise tracking of goods and real-time visibility of the state of your stocks, preventing shortages and overstocking. Thanks to its integration with ERP systems, Expansio ensures smooth synchronisation of supply flows. What's more, this solution is equipped with real analytical firepower : carry out predictive analyses of your logistics needs... and anticipate even more!

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FAQs on stock replenishment

What is the difference between procurement and replenishment?

Procurement refers to the entire process of acquiring the goods needed to run a business. It includes choosing suppliers, managing orders and organising incoming flows.

Replenishment, on the other hand, takes place after an initial stock placement. It involves replenishing products according to sales and forecasts.

How do you choose the best replenishment method?

It all depends on your business and the nature of the products you manage.

A company with stable demand will prefer periodic or forecast replenishment, based on sales estimates.

If demand fluctuates sharply, it's better to opt for a just-in-time strategy or a top-off method.

In some cases, a combination of methods can be used to optimise the process and avoid unnecessary costs.

What are the main indicators to monitor for good replenishment?

Various logistics KPIs will help you monitor your stock management.

For example, the

• the turnover rate indicates the rate at which a product is sold and renewed;
• the coverage rate measures the length of time that current stock can satisfy demand;
• the stock-out rate measures the impact of stock shortages on sales;
• the cost of storage helps to adjust quantities ordered to avoid financial losses.

🤩 Armed with all this advice, all that's left for you to do is choose the stock replenishment method that's right for you, to keep your costs under control while making your brand a safe bet for discerning consumers!