5 Obstacles in Inventory Replenishment that Disrupt Retail Sales

Inventory replenishment: Can you see the future of retail?

Inventory replenishment is the essence of your bottom line. Therefore, it is the critical link in your supply chain that everyone needs to review and tighten.

However, you don’t need a crystal ball to utilize the principles of demand forecasting and stock replenishment. Further you do need a crystal-clear game plan to ensure that you can deliver today what the customer dreamed about the night before.

Customer-Centric Replenishment: Meeting Demand with Precision

The customer expectation of ‘I can dream it one night and get it the next day’ is a dramatic shift for the retailer. Thus, this shift of expectations is forcing a better response from retailers. Furthermore, the customer wants it now, for the right price, and with a smile.

And just to underscore the implications of responding to this consumer demand, several presentations at Retail’s Big Show in January, discussed mastering the balancing act of maintaining a high level of service without overspending on inventory.

Forecasting Roadblocks: Clearing the Path for Effective Replenishment

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1. Demand Forecast Accuracy

2. Vendor Restrictions

Lead Time
Minimum to ship
Pick Size
Date to Place Order
Lead Time to DC
Lead Time DC to Store
Vendor Lead Time Direct to Store or Customer
Lead Times for Cross Dock & Flow Through

3. Order Cycle

How much to buy calculated with one of the two methodologies
Top Down Plan (push)
Bottom Up Service (pull)

4. Vendor AND Retailer visibility of:

Current Inventory
Pipeline (On hand, On Order, In Transit, Waiting to Ship)

5. Promotions, Events, Seasonal and/or Market Reaction

Unlocking Efficiency: The Art of Modern Inventory Replenishment

Measuring and analyzing all of these pieces to optimize the amount of inventory to purchase and then build the purchase order takes a great deal of computing power. Suffice it to say, if your software is over 5 years old, it is managing some of these pieces well (maybe?), and some not at all. If you are using Excel for replenishment, stop. Further, how old is your data, and can your replenishment system respond quickly, even multiple times in the same day? Only recent hardware technology changes have made it economical to calculate all of these into a profit optimized replenishment order.

If your replenishment system is older than your desktop, it is time to replace your replenishment system. Otherwise, why did you replace your desktop?

Precision Replenishment: Balancing Speed and Accuracy

Ultimately, the goal is to master demand forecasting and inventory replenishment so that your business can immediately react with the most desirable product. By Responding faster than the competition gives you the edge that puts you foremost in the consumer’s mind when it comes to which exit to take on the freeway. When you can consistently deliver the product that the consumer wants at the time they need to have the product; you can carve out a big slice of the current retail market.

Demand-Responsive Replenishment: Meeting Customer Expectations

You have to know what the customer wants before they decide which store to go to for the purchase. And you have to stay on point, so that they think of you first the next time they shop. Moreover, it’s a little bit like being able to see the future, which is the essence of modern retail.

Optimizing Replenishment: Key Questions to Ask

Inventory Replenishment is something every business needs to improve. Yet, Inventory Replenishment is the link in your supply chain that is often skipped over on review. The reality is when you tighten the inventory replenishment link, you move yourself well ahead of most of your competition. Review your demand forecasting and inventory replenishment tools. How accurate is your demand forecast? What is your service attained and GMROI in each product class? Ask yourself is it time to ‘Tighten the Links In Your Chain’™?

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Stuart D

Stuart Dunkin is a strategic visionary who leads by calling on his broad range of experience as a former retail executive as well as a consultant for top retailers and for the E3/JDA software company. He founded Data Profits to solve a real-world problem plaguing retailers today – the disjointed relationship between supply chain data, people and business goals. He has experienced first-hand the challenges and frustrations that occur when decisions are made based on wrong data, which often leads to the wrong actions being taken with crippling results like overstock, out-of-stock, and increased working capital.
Stuart graduated from Auburn University, with bachelor of science in business administration.