What are the best inventory replenishment practices for production planning?

1 Determine demand patterns

The first step in inventory replenishment is to understand the demand patterns for your products. Demand patterns can be classified as stable, seasonal, cyclical, or irregular, depending on the frequency and variability of customer orders. By analyzing the historical and forecasted data, you can identify the demand patterns for each product and plan your inventory replenishment accordingly. For example, if you have a stable demand pattern, you can use a fixed reorder point or a periodic review system to replenish your inventory. If you have a seasonal demand pattern, you can use a dynamic reorder point or a seasonal inventory policy to adjust your inventory levels based on the expected demand fluctuations.

2 Choose the right replenishment method

The second step in inventory replenishment is to choose the right replenishment method for your production planning. There are two main types of replenishment methods: pull and push. Pull methods are based on the actual demand from the customers, and trigger the replenishment when the inventory reaches a certain level or when an order is placed. Push methods are based on the forecasted demand from the customers, and schedule the replenishment in advance based on the production capacity and lead time. The choice of the replenishment method depends on several factors, such as the product characteristics, the market conditions, the supply chain complexity, and the inventory costs. Generally, pull methods are more suitable for products with high demand uncertainty, low inventory holding costs, and short lead times. Push methods are more suitable for products with low demand uncertainty, high inventory holding costs, and long lead times.

4 Use inventory management software

The fourth step in inventory replenishment is to use inventory management software to automate and optimize your process. This system integrates with your production planning, order management, and accounting systems, providing you with real-time visibility and control. It can help you forecast demand and plan production, generate and execute replenishment orders, monitor and update inventory levels across multiple locations and channels, and analyze and report performance. Additionally, it can identify areas for improvement.

5 Review and improve your replenishment process

The fifth step in inventory replenishment is to review and improve your replenishment process on a regular basis. You should evaluate your replenishment process based on the key performance indicators (KPIs) that reflect your inventory objectives, such as the fill rate, the inventory turnover, the stockout rate, and the inventory accuracy. You should also collect feedback from your customers, suppliers, and employees, and identify any issues or challenges that affect your replenishment process. Based on the results of your evaluation and feedback, you should implement corrective and preventive actions to improve your replenishment process and achieve your inventory goals.

6 Follow the best practices for inventory replenishment

The final step in inventory replenishment is to follow the best practices which can help streamline and enhance production planning. This includes aligning inventory replenishment with business strategy, collaborating with customers and suppliers to improve demand and supply visibility, segmenting inventory based on product and customer characteristics, optimizing inventory levels and mix to balance service level and costs, and implementing continuous improvement and innovation to adapt to changing market needs.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?