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How to Conduct Inventory Replenishment Successfully?

July 7, 2022

6 min read

Inventory management is one of the most critical aspects of your eCommerce fulfillment supply chain. You need to ensure that this process is carried out seamlessly, so you do not face hiccups during shipping, packaging, order fulfillment, etc. Since your inventory is the main product that will be shipped, you need to ensure that it is in stock at all times in the correct quantity so that the customers don’t have to face an unpleasant shopping experience on your website. To ensure that you have adequate inventory at all times, you need to replenish it constantly. This is where the concept of inventory replenishment comes into the picture. You must pay dedicated attention to restocking your items at the right time. This will help you speed up your order fulfillment process but also help you maintain synchronization between the different order fulfillment operations

Understanding Inventory replenishment

Let’s look at inventory replenishment, its significance, the method utilized for calculating the right inventory replenishment time and quantity, and the best practices to carry out this essential process. 

What is Inventory Replenishment?

Inventory replenishment or stock replenishment is receiving fresh eCommerce inventory from a supplier or manufacturer into the warehouse or fulfillment center.

It also means moving inventory items from the storage space to the picking shelf. 

Significance of Inventory Replenishment

Efficient inventory replenishment forms the core of your inventory management operations. If this process is not in order, you will face unpleasant situations like stockouts, dead stock accumulation, etc. Let’s look at the significance of inventory replenishment in your entire logistic supply chain. 

Prevent Deadstock Accumulation

A major significance of inventory replenishment is preventing any dead stock accumulation. Deadstock refers to inventory that is not being sold but only stored in your warehouse. If you do not carry out inventory replenishment intelligently, there are chances that you will over-purchase items that are not selling and stock them in your warehouse. You will waste a lot of space and resources procuring these items. Eventually, you will need to sell these in a yard sale or with additional heavy discounts on your website. Chances are, some of these items might not even be fit for use by the time you realize they’re not moving. 

Avoid Stockouts

The next advantage of inventory replenishment is avoiding stockouts. Stockouts refer to a situation where the product is listed on your website, and customers have ordered it, but you are out of stock in your warehouse. This is a highly embarrassing situation for you as you need to place a fresh order, which will take more time. This will eventually affect the shipping deadlines, and the customer will receive the orders late. This could ruin the whole shopping experience for the customer, and they might not come to your website again. 

Decrease Shipping Costs

Inventory replenishment might not directly influence the shipping cost, but it does so indirectly. For example, you have multiple warehouses. Your customer ordered a product that was out of stock at your primary warehouse. To ensure that the item is delivered on time, you would split the shipment and send one thing from your primary warehouse and one from the secondary warehouse. This way, your shipping cost would eventually be higher. However, if you replenish the stock for that particular SKU on time, you can avoid the hassle of splitting the shipment because of unavailability.

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Methods For Inventory Replenishment

Reorder Point Method

The first method of inventory replenishment is the reorder point method. The reorder point formula helps you calculate adequate stock levels to meet customer demand. This lets you know the reorder quantity you need and when you should re-order it based on historical data.

It gives you a financial upper hand by keeping a minimum stock at all times. However, you need to calculate the reorder point of every SKU separately.

Periodic Inventory Replenishment Method

The following method is the systematic inventory replenishment method. Under this method, the inventory is re-stopped at set intervals. In this, the inventory levels are looked at specific dates and times without worrying about how low the stock levels may be before that particular date or time. 

Top-Off Method

Finally, the third method is the top-off method. Under this method, inventory of a particular product is topped off in the respective warehouse when there is a slower period or downtime. It is the most suitable for fast-moving SKUs

Best Practices For Inventory Replenishment

Best Practices for Inventory replenishment

Create Thorough Strategies

To carry out inventory replenishment, you first must create strategies for your operations. Define an inventory management process to decide when to reorder inventory. Conduct inventory audits and procedures, and follow warehousing best practices. Monitor your inventory holding costs, shrinkage, and appreciation costs so you know there are no significant cuts into your profit margins. 

Utilize Data

The next best practice is to utilize replenishment data that is available to you. If you have access to real-time inventory management data, you can understand which SKUs are working the best for you, the inventory that is fast-moving, slow-moving, etc. This way, you can carry out proper demand forecasting, calculate the safety stock quantity, find the inventory turnover rate, and make decisions that can impact your business financially. 

Leverage Technology

Finally, utilize proper inventory management software to get more visibility about your inventory levels and make effective decisions regarding your inventory replenishment. This can help you enhance your supply chain by many folds. 

How Is a 3PL Fulfillment Provider Useful?

3PL fulfillment providers like Shiprocket Fulfillment can help you manage inventory without investing in inventory management infrastructure.

Shiprocket Fulfillment has more than 35 WMS-enabled warehouses in multiple cities across India. This means that you can rely on us to take care of managing your inventory, reveal the correct data, and tell you when more stock is needed. This way, you can reorder inventory at the right time without dealing with the hassles of tracking, auditing, etc.

Not just this, you can store inventory closer to customers and ship 3X faster. You can also reduce fulfillment costs, decrease discrepancies, and offer same-day and next-day shipping. 

Final Thoughts

Inventory replenishment is one of the most critical aspects of your inventory management operations. Keep a close eye on your inventory to ensure that you do not overstock or understock at any time. 

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Danish Khan

Content Writer @ Shiprocket

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