Effective inventory replenishment is crucial for maintaining smooth warehouse and distribution operations. However, inefficiencies in the replenishment process can lead to significant disruptions, affecting overall supply chain performance and customer satisfaction.
When inventory replenishment is managed well, it prevents overstocking and stockouts. Both of these cause increased carrying costs, wasted warehouse space, and potential lost sales. Addressing these inefficiencies is essential for businesses to reduce operating costs, optimize inventory levels, and improve service quality.
Evaluate your operations and determine whether you can make improvements. Understand these seven aspects that erode inventory replenishment processes. Implement sound management strategies for replenishment inventory processes. It may be time for a through warehouse optimization study to take corrective actions.
1. Not Replenishing in Case Quantity
When looking to optimize inventory replenishment activities, it is important to think about units of measure. When considering inventory slotting, think about how replenishments will impact these processes.
When using Min/Max, one of several inventory replenishment methods, the minimum threshold will trigger the replenishment. This should be based on the typical demand forecast. It is far more efficient to pull case quantities out of reserve locations instead of counting individual units.
If it is not feasible to replenish in full case quantities, consider pulling a full case. Replenishing the quantity and set the remaining portion of the case to be put back in reserve. This process of putting less than full cases back into reserve locations can be done once picking resumes.
Since most operations are replenishing off-shift, it is imperative to fill the primary location over most other tasks.
2. Not Sizing the Pick Bin to Support a Week of Picking
Tasks that over consumer warehouse labor are those that must be redesigned immediately. Not having enough inventory in the pick location is a primary driver for excessive labor in replenishments. When operations are squeezed for space, companies often decrease the amount of inventory that resides in pick locations.
When this occurs, the frequency of replenishment becomes a significant burden on the operations. Ideally, companies should not be replenishing more than once per week, with a few exceptions. If you are a 5 day a week operation, you should plan for at least 6 days worth of inventory in the pick bin. Doing this allows you to process a weeks worth of orders, plus an additional days worth of inventory as a buffer.
3. Not Analyzing Replenishment Frequency
This goes hand in hand with number two above. Companies must develop an analysis that looks at the frequency of replenishment and adjust accordingly. The analysis should be very straight forward and include the following:
- SKU number
- Location
- Min and max inventory thresholds
- Average daily movement
- Future demand
This should be reviewed at least once a week, but only focusing on the exceptions at the top and bottom. At the top of the exceptions are the runaway items. These are items that are in too small of a location and forcing too many replenishments.
At the bottom of the list are the items that are in prime real estate that should be moved to a less desirable location. Additionally, the quantity should be reduced. The goal is to always balance the inventory needs with the demand.
Forecasted demand will help you to consider when an item peaks and falls off.
These high demand items must be handled efficiently. If not, the management strategies for peak season will be much more costly. These are important aspects of all inventory replenishment strategies.
4. Not Doing Replenishments Off-shift
This is by far one of the most problematic aspects for some operations. It’s also indicative of an operation that has lost control of some or all of the fundamentals. Replenishing while receiving, doing putaways and picking operations are in full swing is asking for trouble, including:
- Creating congestions between pickers and replenishers in aisles.
- Pickers having stockouts in pick locations.
- Resource contention for equipment such as stock pickers.
The exception to this is when an item has increased demand, and a “hot” replenishment is needed during picking times. However, hot replenishments should not comprise most of the activities. If this is the case, then it is indicative of other issues. These include not enough staff for replenishment, or the amount of inventory in pick bins is too little.
5. Not Pulling or Staging Replenishments in Location Sequence
This aspect is where a good Warehouse Management System (WMS) becomes important and beneficial. Efficiency comes from pulling replenishments in a logical pick sequence – much like order fulfillment.
The same is true with the staging of replenishments. It is equally important to the process that once replenishments are pulled, that they are in an efficient, logical sequence to aid in filling stock locations. A good WMS will allow for efficient batching much like when you fulfill orders – i.e., zone-based pulls etc.
6. Inefficient Receiving Processes
When fulfillment centers have inefficient receiving processes, it delays the inventory getting into stock. This metric, dock-to-stock time, is important to understanding the potential impacts on the replenishment processes.
These often lead to situations where the inventory is waiting to be received but is causing a stock out situation.
Making matters worse is when the inventory is received but not put away. Attempting to locate inventory on the dock for replenishments drives of labor costs and is disruptive to receiving processes.
7. Not Having the Size of the Pick Bin Match the Max Quantity
The maximum quantity for a picking bin needs to easily hold the quantity being replenished. The replenishment process becomes labored and inefficient when workers are attempting to make inventory fit. It is even more problematic when the inventory that doesn’t fit is left on the floor in front of the picking location.
This is such a common practice that should never occur. This additional inventory ends up getting damaged or lost. At other times, workers place inventory on top of other locations which further causes inventory issues.
SHARE