What is warehouse replenishment: Best practices and optimization

Inventory is one of the biggest concerns for any ecommerce business. Not having enough inventory can mean missed sales, while having too much can lead to wasted money and lost profits. To optimize your inventory, you need to implement warehouse replenishment best practices. But what is warehouse replenishment, and how can you optimize your inventory strategy?

Let’s dive in.

What is warehouse replenishment? 

Warehouse fulfillment and warehouse replenishment are often used interchangeably; however, these two terms mean different things. Warehouse fulfillment takes the product from the supplier to their end customer. This customer may be another company, a manufacturing facility, a retail store, a distributor, or the end consumer.

Warehouse replenishment, on the other hand, refers to one of two occurrences: 

First, warehouse replenishment means refilling your warehouses from external sources with products that your company regularly orders. In this case, it is between you and your vendor, not your customer.

Second, it can mean moving materials to either different processing or storage locations so that you have them available to fill customer orders.

Warehouse replenishment is necessary when your products reach the point where they must be re-ordered to avoid stock shortages.

With an inventory management system, your re-order points can be calculated easily based on your company’s parameters for each of its products.

What can efficient warehouse replenishment processes mean for your business?

Quite simply, efficient warehouse replenishment can mean the difference between success and failure. 

If your warehouse is constantly running out of stock, it will cause big problems for your business. Not only will you lose customers and sales, but you’ll also incur additional costs. 

On the other hand, if you have an efficient warehouse replenishment process in place, you’ll be able to keep your inventory levels stable, saving your business both time and money.

Advantages of efficient warehouse replenishment 

Here are some of the key advantages of efficient processes for your ecommerce business:

• Decreases your overstock
• Timely deliveries
• Reduction of labor costs
• Decrease of dead stock and slow-moving products
• Reduces logistical challenges
• Ability to meet demand without shortages
• Maintain buffer stock levels

Customers now expect lightning-fast order fulfillment times from the time they hit “pay” on their computer or smartphone to the moment the product reaches their doorstep. 

This is why it’s so important for ecommerce businesses to streamline and optimize their warehouse operations. 

How does warehouse replenishment work?

Warehouse replenishment models are mathematical models that help warehouse managers determine When products and materials should be re-ordered.

Here are some of the most common replenishment models:

Minimum/maximum inventory replenishment

The min/max replenishment model, commonly known as the “routine” method, triggers restocking activity when a specific product reaches a predetermined minimum threshold. This model is most efficient for SKUs with predictable demand.

Demand inventory replenishment

The demand replenishment model is most often used for warehouses with limited space. With demand replenishment, the quantity is limited to the amount necessary to fulfill pending orders without creating excess stock.

Top-off inventory replenishment

The top-off replenishment model is similar to the min/max replenishment model but generally runs on schedule or per batch. This model is most efficient during high-volume sales or work shortages. 

Periodic inventory replenishment

This model places replenishment orders when inventory levels fall below the pre-set minimum threshold. The periodic inventory replenishment is generally used when significant storage is available for products and is used with longer lead times.

Identifying the right mix of replenishment models

Choosing the most effective replenishment model is key for efficient warehouse operations. In many cases, using multiple replenishment models will help an ecommerce business achieve and maintain an optimal balance between consumer demand and safe inventory levels, especially during periods of high demand.

What can affect your replenishment?

A variety of factors can impact your ecommerce business’s warehouse replenishment, including:

Company forecasting

Your business’s forecast numbers can fluctuate greatly based on changing desires and needs of your customers, supply chain issues, and other factors. When your company does not meet or exceed its forecasting, this can impact your warehouse replenishment.

Not maximizing space

When your warehouse space is not maximized for efficiency, you may not have enough space for needed inventory or raw materials. This can negatively impact your warehouse replenishment, which can impact your inventory levels.

Poor supply chain visibility

End-to-end visibility is critical in ensuring that your supply chain is as efficient as possible. When your business cannot provide accurate, real-time data to your suppliers, replenishment can be delayed causing further kinks in your supply chain down the road.

Warehouse replenishment best practices

What are best practices? Both communication and realistic assessment of your company data is critical. 

Below you’ll find some of the most effective best practices:

Assess and reassess your business forecast

To ensure that your business forecast is as accurate as possible, you’ll want to periodically reassess whether or not your e-commerce business is on track to meet your forecast. 

Additionally, you’ll want to gather input From your team members, including planning, sales, warehouse management, suppliers, and even your long-term customers. 

By regularly reassessing how your business is measuring up against its forecast, you can adjust your replenishment plan as necessary.

Formulate effective stocking level strategies

Your strategy for stock levels will depend on the size and niche of your ecommerce business. When formulating your replenishment strategy, it is important to consider current supply chain level challenges, long-term customer plans, data from your suppliers, and sales trends. 

Create better end-to-end visibility

Make certain that your entire supply chain is looped in about your stock levels from end to end. You’ll want to communicate any additional information, including shipment times, materials shortages, etc.

One of the most important factors regarding replenishment is communication and forecasting throughout the supply chain. You will want to remain both realistic and flexible, so your company is always prepared to deal with excess inventory as well as shortages.

Automate your inventory replenishment processes

Automated inventory replenishment is far more efficient than manual replenishment, resulting in backorders, stockouts, and excess inventory. Leveraging ERP systems to automate your company’s replenishment processes optimizes efficiency and prevents stockouts and backorders.

Monitor and measure your vendors’ performance

The time and energy your company spends optimizing your warehouse replenishment can all be undone by poor vendor performance. This is why monitoring and measuring your vendor performance is so critical to the success of your strategy.

How to optimize your warehouse replenishment process

There are several practical strategies to optimize your process. Here are some of the most efficient and effective options:

Install a real-time WMS

Warehouse management system (WMS) replenishment modules automatically re-order at predetermined intervals to keep inventory levels stable, even during high volume periods, such as the holidays. A real-time WMS, such as SkuVault Core, is most efficient when paired with scan validation.

Barcode scanners and RFID

Utilizing warehouse technology, including RFID and barcode scanners, are a cost-effective way to increase accuracy and optimize the replenishment process.

Implement predictive analytics

Predictive analytics estimate the number of sales per day, taking into account both demand and seasonality.

Set realistic KPIs

Setting realistic key performance indicators (KPIs) is key for keeping employees motivated. Realistic KPIs are both challenging and achievable.

Plan for emergency replenishment

As efficient and data-driven as your plan may be, emergencies can and will still occur. 

Your best strategy for handling emergency replenishment is to prepare an “if, then” plan in the event that disasters occur. Planning for emergencies before they happen saves valuable execution time and will keep a small emergency from turning into a significant one.

Keep an eye on fast moving inventory 

Regularly assess your best-selling items to ensure they are always in stock.

Enhance picking accuracy

Use automation to reduce your picking and packing errors and enhance your employees’ picking accuracy.

Final thoughts

Efficient warehouse replenishment can mean the difference between success and failure for an ecommerce business. By implementing efficient processes and best practices, your business can optimize your warehouse replenishment to ensure that products are always in stock, excess inventory costs are minimized, and your customers’ needs are always met.