Are you looking to automate your inventory replenishment processes? Consider how these replenishment methods managed by the right ERP system can improve inventory management:
Look at the reorder point first when transitioning to automated inventory replenishment processes. When a reorder point is in place, your ERP system can automatically place a replenishment order when the inventory quantity falls below the safety stock level. It’s important, however, to factor in seasonality and trends when setting reorder points, so analyze your data carefully beforehand to avoid inventory shortages.
Another method that can be automated is lot-for-lot replenishment, if your business is set up such that every unit sold must be replaced—ideal for maintaining a minimum amount of inventory. Your ERP system can handle reorders based on a user-defined period of time for every item sold. Be wary, however, of incurring increased shipping costs if you have more frequent reorders.
With the average usage method, you must review your sales history and calculate the average sales for a specific time period and then use this calculation for forecasting a replenishment schedule based on sales per day or for whatever time period you define. This method is a good fit if you’re factoring a predictable inventory increase during a certain time—such as the holiday season. There are two things to keep in mind with average usage: the time period to calculate will vary according to item or category, and you’ll need to keep an eye on statistical spikes, like a sudden drop in demand for an item. To help manage these spikes, your ERP system should allow you to manually adjust your forecast according to trends.
In demand planning, you individually apply statistics and other information to determine the best inventory replenishment schedule for each item. For businesses where sales vary widely, this method is usually the best approach.
While your replenishment process can be whatever best suits your business, what matters most is the quality of the data you feed it.
When you begin automating your inventory replenishment, take a continuous improvement approach, applying a method that is better than what you had before—but don’t expect perfection all at once. Start by carefully evaluating your business processes and requirements to determine a path to making incremental improvements.
About the author
Wm. Matthew Street is a developer and business analyst at ArcherPoint. A retail ERP expert, Matthew has spent more than 32 years focused on driving improvements in business processes, operations, inventory management, business planning, and accounting.
For more information on how an ERP solution can benefit your retail business, email [email protected].
By ArcherPoint LLC, a Microsoft Dynamics Partner