“To replenish” means to re-fill or make complete once again. The replenishment business model functions on the principal of efficient relocation of inventory from a warehouse or bulk storage area to an order pick-up or shipment area. The process of replenishment keeps products flowing through the supply chain smoothly, thereby replacing depleted inventory and preventing excess or shortfall at any stage.

The replenishment process can be triggered at any point of the production, distribution or sales cycle, depending on the specific requirements of different industries. For example, a business dealing in non-perishable goods may plan a replenishment cycle recurrence while there is still enough stock on hand to meet orders for the next 30 days; on the other hand, a seller of fresh produce might prefer to replenish stock as soon as a pre-determined minimum order quantity has been reached.

There are two main types of inventory replenishment: the traditional methods i.e. event-triggered and time-triggered reporting policies, and the statistical process control or SPC method.

SPC Method

The SPC method uses control charts to monitor the inventory replenishment process, and detect flaws which can then be removed to help increase efficiency, reduce waste and cut costs further. The SPC method places a large emphasis on preventing problems. Preventing problems saves the company money and makes the customer happier because there is no delay in the shipment of the ordered product.

Event-Triggered or Time Triggered Reporting Policy

Using the event-triggered or time-triggered reporting policy, companies are able to continuously monitor inventory levels and immediately alert personnel of any changes. Event-triggered reporting allows companies to be more efficient. Using an event-triggered reporting method, managers will be immediately notified if a product is unavailable. This cuts down on miscommunication between departments and eliminates the need for excess paperwork. In addition, managers can use event-triggered policies to determine exactly how long certain products have been sitting in inventory and how much they have budgeted for. This allows the managers to keep the inventory investment as well as current financial condition of the company in mind to help reduce excess spending and avoid batch ordering.

Managers can also use information gathered through replenishment cycles to forecast demands, and save time and money by reducing the expense of last minute reorders and lost sales opportunities when stock is unavailable. Managers can then automatically calculate past inventory turnovers and allow for demand spikes such as around a national holiday or special event.

An efficient replenishment cycle helps prevent overstocking. A properly controlled inventory will help business owners locate products easily, process and dispatch orders faster, and reduce significant operation costs. For the food industry, controlled replenishment can help reduce wastage. Companies that have a controlled inventory are less likely to go over budget on production costs, and more likely to have higher customer satisfaction ratings.