Inventory Replenishment has three key pieces:
When to reorder, or reorder frequency, tells us the size and amount of an inventory replenishment order. The most profitable retail businesses know what product the customer wants, how much they will pay for it, and when they want it. Profitable retailers need only get those products into customer hands with the least amount of expense. Sounds familiar, right? Ever hear of the marketing term ‘shopper centric?’ Note how many customers bring out a smart phone and scan the price and availability of products? How many times do retailers and the press mention how well Amazon.com operates inventory replenishment in their supply chain?
Amazon.com is very good at identifying the individual products a customer will buy, a bottom-up approach that represents a dramatic change in retail top-down planning. The opportunities for retail inventory replenishment success today are an undivided combination of customer BI analysis and vendor collaboration, resulting in a single tight supply chain. Recent articles concerning Supply Chain Best Practices illuminate this truth even more.
Ivano Ortis, EMEA research director of Global Retail Insights, an IDC company, notes: “The right formula for improving shelf availability at reduced stock carrying costs is the integration of retail demand intelligence [RDI] solutions, where demand forecasting and analytics are core components underpinning inventory replenishment decisions and other core retail processes.”
Product Order Point – Think about it… if you sell 10 units a day and your lead time is 17 days, when you have 170 units on the shelf, you need to place a replenishment order. 17 days x 10 units/day = 170 units needed to support sales while you wait for the inventory replenishment order to become available.
It’s time to use a tool set that can demand forecast your success at a product/location level. You need to meet the consumer demand at a SKU level in order to complete the sale. Consumers do not buy a category or style, they buy a SKU, a UPC, a specfic product and that’s where your business success begins. Why settle for anything less than demand forecasting that is 93% accurate out of the box?
Must include the total number of days from when you place the inventory replenishment purchase order until the goods are available for the consumer. Lead time factors include vendor build, prep and transport days. If you have a DC or multiple DC and store combinations, you must also include DC hop time between DCs and DC prep time. There is also DC wait time until the scheduled store ship date and transport days from DC to store. These different stops MUST be factored into a lead time. ONLY a multi-echelon system, such as iKIS can provide the correct vendor lead time. Very few supply chain tools offer this multi-echelon capability, but it is mission critical if you want the goods to arrive on the shelf for the consumer ‘Just In Time’ (JIT).
You need enough on the shelf to support sales between orders. If you are ordering every two weeks, you need a two week supply. Lead time covers inventory needs during PO wait time. Assuming you have good demand forecasting (right?); the question is how often to reorder – replenish.
iKIS provides inventory optimization that measures costs and profit over time and maps the data with the vendor shipping minimums or constraits to determine the best and most profitable reorder schedule. It may be 7 days and it may be 21 days. Most systems have a simple Order Review program that most retailers schedule to run weekly. The results are often overstock and out of stock at the same itme.
Today, retailers need systems and solutions that can predict the future, know the consumer habits and apply all the data to the supply chain instantly for perfect inventory optimization and maximum profitability. Retailers need a solution where BI analytics and complex demand forecast algorthims can be combined and used in a seamless fashion that use buyer intellect and buyer skills to create perfect inventory replenishment.
Creating the Purchase Order can get complicated:
It’s complicated, but Data Profits iKIS makes the process easy. We help you make the right decision that ensure you get the right inventory replenishment orders placed for the company. Read and see more in our Order Management section.
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Because you can’t sell what you don’t own, items such as fuel price changes and mergers can play havoc with your inbound inventory. You need to know how long from when you place the order until the order is available to ship. Just like there are different parts to your business, you need lead time forecasting that reacts to the individual parts of your business.
Whether multi level DC or multi level within the distribution chain, each ‘hop’ takes time that is not included in most supply chain solutions or is one all encompassing number. That’s not the right solution, iKIS provides a real multi echelon LT solution that can respond independently to each hop on your supply chain because each one can result in a different amount of days between PO receipt and inventory available to sell.
To optimize the profit potential on your inventory you need to balance service goals, inventory carry costs, inventory acquisition costs, vendor minimum constraints, gross margin and GMROI. Too many orders and acquisition costs reduce your profits; likewise too few orders over time, lost sales and carry costs reduces your profits. You need a system that can balance all the factors to determine how many days between orders. iKIS delivers your Inventory Optimizations with tools that include:
To have real ‘optimized inventory’ you need a Due Order module that can see the future and know the difference between demand need and filling up space on the truck.
iKIS delivers several tools in an easy to use format including: