What is Inventory Replenishment & Why it is Important?
Inventory replenishment is the process of purchasing the goods, components, and raw materials needed to build and sell products. It ensures products and materials are procured and delivered to the warehouse in a cost-effective, timely way.
The replenishment process involves sourcing suppliers, procuring products and materials, developing effective delivery processes and coordinated lead times, and regularly reviewing current inventory processes.
Why inventory replenishment is so important
Poorly managed inventory replenishment can negatively impact your customers and the overall health of your business. The problems it causes result in lost revenue, reduced profits, and damaged reputation.
When handled correctly, inventory replenishment benefits a business by:
Freeing up cashflow through minimal stocking. Inventory replenishment involves negotiating bulk-buying discounts and considering seasonal changes to cost. Done right, this minimises cost and releases cashflow for other areas of your business.
Preventing stock expiry. Stock expiry and wastage are costly, but they can be avoided. Coordinating the purchase and delivery of new stock so that it never arrives too late or too early is essential to negating stock expiry (and delays in shipping to the customer).
Reducing overall freight costs. Procuring suppliers that are closer to your facilities, or charge less for freight, is a key part of the inventory replenishment process. It may be possible to avoid air freight costs if the product can be ordered with enough lead time to allow for truck, ship, or train delivery. Bulk buying can also provide leverage for discounted delivery costs.
We recommend appointing a specific person to the role of Inventory Replenishment Manager to ensure your business has access to these important benefits by ticking every box.
How to optimise your inventory replenishment strategy
Inventory replenishment is more than just reordering goods to use in assemblies or as stock.
To best benefit your business, you must procure and manage suppliers that are a great fit for your business.
This means: Researching and comparing various suppliers.
Negotiating supplier contracts that are most beneficial to your business and clearly outline the process for mitigating problems that may arise.
Implementing the most effective delivery processes.
Responding to changes in demand or supply capability, or external factors such as weather events or other disruptions.
Continuously reviewing suppliers and processes to ensure they remain the optimal choice for your business.
You’ll need to work closely with your inventory management team to ensure their systems meet the broader priorities of the business, such as reducing overall spending or improving delivery time.
Request a demo today to see for yourself how GOIS Inventory’s easy-to-use, efficient inventory management software can make things easier for your business.