Imagine running a busy coffee shop. One morning, one of your regulars comes in for their usual vanilla latte — but you can’t make it. You’ve run out of syrup, and no backup bottles are in stock. Now, you need to act fast to secure a rush order for the following day.
This is the kind of challenge businesses face when trying to manage inventory. To stay on top of replenishing goods, you need strategies to keep the shelves stocked and avoid rush orders without tying up valuable funds in inventory that won’t sell right away.
In this article, we’ll share expert tips and tricks on stock replenishment to help you lower unnecessary expenses while making sure customers always get what they’re looking for.
What is stock replenishment?
Stock replenishment is the process of monitoring, maintaining, and restocking inventory to ensure you have enough product available to meet customer demand without ordering excess and wasting resources. This process includes analyzing purchasing trends, setting strategic reorder points, and placing orders at the right times to avoid stockouts or overstocking. Stockouts lead to lost sales, while overstocking wastes money and takes up valuable storage space.
The stock replenishment process
Here’s an overview of the ongoing steps involved in the replenishment process. Repeat these periodically to maintain an up-to-date ordering strategy.
Monitoring inventory
Knowing your inventory level is key to ordering the right amount of stock. With inventory management software like Fishbowl, you can monitor inventory in real time and get alerts when stock is running low.
Calculating your reorder point
The reorder point is the level of inventory at which you need to order more stock to avoid running out. Calculate this based on how much you sell each day (average daily usage), how long orders of new stock take to arrive (lead time), and a buffer (safety stock) to cover any unexpected spikes in demand. Here’s the formula:
Reorder point = (Average daily usage x Lead time in days) + Safety stock
Imagine you’re a retailer selling cell phone accessories. If, on average, you sell 10 car chargers per day, lead time for getting new stock from your supplier is 7 days, and you have a safety stock of 50 chargers on hand, the reorder point calculation will look like this:
120 chargers = (10 chargers per day x 7 days) + 50 chargers
Using this formula, you’ll know that when charger inventory drops to 120, it’s time to order more. Fishbowl can also calculate and automate reorder points for you, taking this task off your to-do list.
Receiving and updating inventory
When you receive new stock, update inventory records to add it to your existing stock count. This ensures your records are accurate so you can manage current inventory and restock strategically.
The benefits of stock replenishment
Here are some benefits of a solid strategy:
- Avoiding stockouts: With a strong replenishment plan, you always know what’s in stock and can reorder effectively so you won’t miss out on sales.
- Cutting down on excess inventory: Extra inventory takes up space, which means higher storage costs and unsold goods, tying up money you could use to grow or improve your business. You also run the risk of products expiring or becoming obsolete.
- Keeping customers happy: A good replenishment system helps customers see you as a reliable place to find what they need. This makes them more likely to come back and recommend your business to others.
8 best practices for effective stock replenishment
Try these best practices to make the inventory replenishment process more efficient and accurate.
1. Use data to forecast demand accurately
Demand forecasting looks at past sales and market trends to predict what customers will want in the future. This data helps you identify trends and anticipate changes in demand, which enables you to plan and adjust stock levels. A fashion retailer, for example, might look back at previous sales for a particular season and industry trends to decide what types and styles of clothing and accessories to offer.
2. Implement automated inventory management software
An inventory management system like Fishbowl can make the stock replenishment process smoother and more efficient. These advanced tools automate many tasks, like generating purchase orders and sending them to suppliers, letting you focus on other areas of the business.
3. Calculate and maintain safety stock
By calculating and keeping the right amount of safety stock, you’ll have a backup supply ready to go if demand suddenly spikes or there are supply chain delays. This safety net helps you fulfill customer orders without delays.
4. Set clear reorder points
The reorder point system illustrated above is one of the simplest methods for replenishing stock. In this approach, you calculate the reorder point, and when stock drops to or below that level, an order is placed to restock. Knowing these levels helps you match stock levels with how things sell, ensuring you’re always ready to meet demand while keeping storage costs down.
Keep in mind that these reorder points aren’t necessarily stationary. It’s a good idea to revisit them from time to time and make adjustments, especially during seasonal peaks and valleys.
5. Regularly review supplier performance
Regularly check in on suppliers to keep your stock replenishment system running smoothly. By assessing supplier reliability, you can quickly identify problems like chronic delivery delays, declines in product quality, or communication issues and fix them before they become more significant. Staying on top of these things helps you make smart choices about which suppliers to keep working with.
6. Optimize orders with economic order quantity (EOQ)
EOQ strikes a balance between ordering too often (which can add up with shipping fees and handling costs) and holding too much inventory (which can cost you in storage, insurance, and spoilage). By using EOQ, companies can make better decisions about when and how much to order, helping to keep costs down and inventory management efficient.
In the food and beverage industry, for example, EOQ helps businesses order the right amount of perishable goods, reducing waste and saving on storage.
7. Monitor lead times
Lead times for getting products shift based on supplier availability, seasonal demand, and market conditions. Staying aware of these shifts allows you to adjust your reorder points and safety stock levels to stay ahead of demand.
8. Conduct regular inventory audits
Regular inventory audits help keep records accurate and up to date with what’s in stock. Comparing your records to your actual inventory on the shelves allows you to spot discrepancies, like mistakes in data entry, missing or damaged items, delays in recording transactions, or supplier errors. Stay aware of your stock to catch these problems early and reduce the chances of inventory issues.
For instance, a retail store selling bath and body products might need to review inventory weekly, especially if demand increases around holidays or special occasions, to ensure they don’t run out of popular items during busy shopping times.
Streamline your stock replenishment with Fishbowl
With a powerful inventory management system, stock replenishment is a breeze. Fishbowl offers helpful tools like automated reorder points, real-time inventory tracking, and detailed reporting to keep your inventory levels where they need to be and boost your overall inventory management.
Ready to see how Fishbowl could streamline your stock replenishment and other operations? Book a demo today.