Retail Digital Transformation and 4.0

How to select the right Replenishment Strategy

The Right Replenishment Strategy: What You Need To Know To Successfully Manage Inventory.

In retail, inventory is everything. Okay, maybe it’s not everything but if you’re not effectively forecasting and managing your supply chain, get ready to experience some serious retail business headaches.

After all, you can’t sell boatloads of product if you don’t have enough inventory on your shelves or in your warehouse to meet demand. People can’t purchase that must-have item if it’s not on the shelf or readily available for delivery.

On the other hand, you also can’t afford the carrying costs that occur when you have too much stock sitting around the backroom or warehouse collecting dust.

Having an effective inventory replenishment strategy in place helps brands and retailers avoid these costly supply and demand missteps by making sure inventory levels remain optimized.

How Retail 4.0 Is Driving Inventory Replenishment

Effective inventory replenishment really comes down to sales data and insights. How fast are items selling? How much product is currently on shelves and in the warehouse? How is the customer purchasing, in store or online? What regions are hot and what regions are not? How fast can your supplier fulfill a reorder?

New Retail 4.0 software and digital data solutions are answering these questions with a level of speed and accuracy that is changing the game in inventory replenishment.

Imagine the inventory management advantages of being able to measure every aspect of the supply chain in real time? This isn’t just possible through new technology. The real kicker is that this data is being captured, collected and distilled into daily, weekly and monthly reports, complete with supporting photos, that detail everything you need to know for precise inventory management, including:

  • Store merchandising and shelf space
  • Inventory on shelves and in the warehouse
  • Inventory on order
  • Sales by location, region, time period, or any variable you select
  • Customer engagement/salesforce performance
  • Marketing and promotions in play
  • Seasonality factors
  • And more

This new wave of retail technology is an instant window into supply and demand. By knowing what’s selling, where it’s selling, when it’s selling, who’s buying, how often and why, brands and retailers have a new inventory replenishment superpower. Interested in learning more? Connect with the retail technology and management experts.

The Replenishment Configuration Equation

There are a variety of effective replenishment strategies to choose from, however, the goal of any replenishment program is to find that ideal equation where item orders align with item sales. This is done by effectively determining two primary inventory variables:

  1. Safety Stock – Think of safety stock as the “minimum stock rule”. It’s the inventory buffer you need to carry in order to feel adequately protected against random fluctuations in supply and demand. You don’t want to carry too much, just enough to secure stock levels in the event unforeseen situations arise. 
  1. Replenishment or Stock Scheduling – This is your basic forecasting strategy. It’s determining the amount of product you need to order, and how often you need to order it, to maintain the ideal inventory level to meet customer demand without carrying excess stock.

How you go about determining the right replenishment strategy to effectively manage “min and max” levels really depends on how you conduct business, the types of items you’re selling, the lead times necessary to fulfill orders, and how much it costs you to carry inventory. So let’s look at the various inventory replenishment strategies.

Reorder Point Strategy or Min/Max Strategy

A reorder point strategy for inventory replenishment is based upon reaching a specific minimum or “min” level of product in stock. Once you reach this level of inventory, it signals that it’s time to reorder. For example, if you’ve determined that a healthy maximum inventory level is maintaining 600 items in stock, you might set your reorder point at 150 items.

In this case, 150 becomes your “min” level in the replenishment process and it triggers a new order. However, it’s also important to remember that maximum inventory number to prevent overstocking. In this case, it would be 600. You never want to carry more inventory than that, so in our case you would not order more than 450 units based on min and max levels.

A reorder point strategy tends to work best for companies marketing fast-selling products or items that have a fluctuating demand. Establishing a fixed point for replenishment simplifies the process by setting reorders at a point where safety stock is ensured and there is ample lead time to replenish inventory.

Periodic Replenishment Strategy

A periodic replenishment process means that inventory quantity is regularly examined at predetermined time intervals. For instance, a company might measure inventory every four months. If it looks like inventory levels are running low and need replenishing, then an order will be placed. If inventory appears adequate no order will be placed.

There is a little catch with periodic inventory replenishment that needs to be considered. Even if inventory runs out before the specified time interval, a company would not place any new orders until the review point. During that period, shelves would remain bare and that, obviously, would lead to a loss in sales.

For this very reason, periodic replenishment is used most often by companies with highly predictable sales and demand cycles. Regardless, any business relying on a periodic replenishment strategy would make it a point to regularly review supply and demand.

Top-Off or Lean Time Replenishment Strategy

Top-off replenishment uses slow demand periods to top off inventory in preparation for more efficient performance during high-demand periods. During these slower times, inventory is maximized based on minimum and maximum inventory thresholds like those set in the min/max approach.

This replenishment strategy works well for brands and retailers that have short picking windows where demand is high and sales come fast and furious. By optimizing the supply chain during low demand periods, they’re ready with inventory when those high-volume periods hit.

Demand Replenishment Strategy

A lot of business rely on this tried-and-true inventory replenishment method. Quite simply, new stock is ordered when demand dictates. In other words, orders are based on the inventory necessary to satisfy current sales.

Demand replenishment might sound simple enough; however, we all know that retail is an ever-changing industry. Therefore, part of the challenge is monitoring the market and forecasting correctly to make sure your business has enough quantity should future demand change. Of course, if you’ve done your homework and put together a well-thought-out replenishment strategy, you should have ample safety stock in place to handle any short-term changes in demand before re-evaluating your replenishment strategy.

Which replenishment strategy do you use? Do you have best practices in place to track sales and inventory? Maybe you’re dealing with multiple products and therefore multiple replenishment strategies?Learn how technology can answer your toughest inventory and supply chain challenges.

Techy Tips On Optimizing Your Replenishment Process

  1. Leverage digital data capture technology

Digital data solutions can add lightspeed and incredible accuracy to any inventory replenishment program. For a good example, let’s look at typical retail field teams. Retail field teams regularly visit stores to track product sales, ensure that store shelves are full and optimally merchandized, and make certain enough quantity is in stock and available to customers.

Intelligent data capture automates all of these tasks using a typical smartphone or tablet device. Field personnel simply enter the data and it is instantly available to decision makers. Sales and inventory numbers can be called up at any time, from anywhere, and viewed in clear reports that detail every aspect of the supply chain, from what’s on shelves, to what’s in the warehouse, to what items are on order.

Plus, you’ll get real-time access to other analytics that impact inventory replenishment decisions. Which items are selling fastest? Which items are not moving? Which regions and locations are showing the highest sales figures? Are marketing and promotional programs driving new sales and calling for added inventory?

  1. Incorporate barcodes and/or RFID in the warehouse

Using barcode scanners and RFID in your warehouse facilities are great ways to save time and eliminate errors in your replenishment process. These digital tools allow personnel to scan stock that’s being added or deducted with digital ease and accuracy. This is far more reliable than the antiquated pen-and-paper methods that are still used by many businesses today. For example, RFID tags eliminate the need for warehouse personnel to scan inventory item by item. Instead, every tagged piece can be read simultaneously thanks to RFID technology.

  1. Integrate predictive analytics

Once again, it’s digital technology to the rescue. Inventory replenishment strategies are strengthened by the ability of software solutions to predict sales drilled down to a day-by-day, item-by-item, store-by-store, and region-by-region basis. Having a clearer idea of demand forecasting makes it far easier to predict the quantity of inventory you’ll need and when it will need to be replenished.

To continue the conversation on the many ways technology is impacting inventory replenishment and supply chain management, contact the experts atMobile Insight®.

Mobile Insight® is the only retail and merchandise management solution designed to meet the brick and mortar sales challenges of high-value brands and retailers. Unlike hardware and software providers that focus on fast-moving goods, the Mobile Insight® platform delivers assisted sales solutions for more complex, interactive, and customer-centric environments. Combining data from in-store systems, 3PLs, employee and partner activity, Mobile Insight® enables informed, smarter decisions that drive sales and operations excellence. For more information, visit


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