Inventory replenishment

Having a properly controlled inventory will help companies locate products easier, speed up fulfillment times, and reduce their operation costs. Inventory is one of the largest factors of the consumer supply chain. Companies that have a controlled inventory are less likely to go over budget on production costs. Some companies will order excess inventory to compensate for a breakdown in communication. This can be from a miscalculation by marketing and sales, exaggerated sales revenue for a set time period, or improper control of the supply chain.

Inventory replenishment is defined as "relocation of material from a warehouse or bulk storage area to an order pick-up or shipment area." The relocation of the material needs to be documented. Some of the most important factors of inventory replenishment are lead time, order quantity, and the replenishment intervals.

One of the main reasons companies have too much inventory on hand is due to their order batching system. They may have the supplies held at an off-site facility and they will input the orders into a computer system where the supplier receives them. If the supplier and the retailer do not have corresponding numbers, the inventory supply chain can become distorted. To combat this problem, inventory replenishment is used. There are two main types of inventory replenishment: the traditional methods, event-triggered and time-triggered ordering policies and the statistical process control or SPC method.

The SPC method uses control charts to monitor the inventory. These charts allow companies to keep tabs on the end result of their distribution center. They will be able to see the entire process and determine if it is working properly. Companies can then find ways to improve their system and reduce the amount of waste they produce. The SPC method places a large emphasis on preventing problems. Preventing problems also leads to a reduction of time it takes to produce the product. This saves the company money and makes the customer happier because there is not a delay in the shipment of the ordered product.

The event-triggered or time-triggered reporting policy is another popular inventory replenishment policy. Using this policy, companies are able to have immediate reports that alert personnel about changes. They are able to continuously monitor their inventory levels, reducing the amount of time it takes for production to begin on certain products. Event-triggered reporting allows companies to be more efficient. Using an event-triggered reporting method your managers will be notified if a product is unavailable or if the product needs to be ordered to meet the needs of the customer. This cuts down on miscommunication between departments and it eliminates the need for excess paperwork.

Another important aspect of event-triggered reporting is benchmarking. Managers are able to know the inventory time average. This means, they will know exactly how long certain products have been sitting in inventory and how much they have budgeted for. This will allow your managers to compare the inventory investment to the current financial conditions of the company, thereby cutting excess spending.

Event-triggered reporting will help individuals see information that is relative to their job. This will make your warehousing staff and marketing staff members reduce wasted time looking for the reports they need. The marketers can pull up reports about sales, profits, and cash-flow while the warehousing staff can pull up reports about inventory stock levels, shipment processes, and other notifications pertaining to inventory.

Both methods of inventory replenishment can reduce your inventory costs by 50 percent or more. Your batch ordering will be cut down by 30 percent or more as well as your lead time. The backorders you have in inventory will be reduced or diminished entirely, giving your company higher customer satisfaction ratings.