Automated Replenishment: How Inventory Management Software Algorithms Maximise Retail Sales

Learn why minimum stock level formulas don’t work for retailers and how automated stock replenishment can maximise your retail sales using real-world data and algorithms.
0
min read
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Retail Express
April 28, 2022
Aaron Blackman
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CEO & Founder
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Retail Express
April 28, 2022

Table of contents

Inventory management can be a time-sapping, costly headache for retailers. And if you're following outdated formulas like Minimum Stock Level (MSL) to place your stock orders you're more than likely blocking your potential for profit.

Fortunately, if you switch to good inventory management software, there are tools that can drastically change your situation for the better. In particular, automated stock replenishment (automated replenishment) can be a game-changer when it comes to slashing admin time and maximising profits.

So why exactly is automated replenishment such a game-changer?

Automated replenishment uses clever algorithms based on real-world data and analyses critical metrics across all your stores and channels to configure recommended purchase orders based on real demand.

It can minimise overstocks and understocks, save a truckload of time and maximise your sales potential. And it'll keep your customers exceedingly happy — because they can access more of what they want — and spend a lot more. Happy days.

What's wrong with the Minimum Stock Level formula?

The Minimum Stock Level (MSL) formula is a global model retailers use to manage inventory. It's entirely unfit for purpose — and always has been. Why? The main problem with MSL is that it assumes your weekly and monthly sales will always be the same, which doesn’t exist in the real world.. 

The same product never sells at the same run rate every week. It never has, and it never will. MSL is worse than redundant; it's financially damaging to your business. Let's look at why. 

MSL: A self-perpetuating sales blocker

Your weekly sales for each product SKU will vary in any given month. The only scenario where a retailer sells the same volume of a specific product every week is in their imagination. Or rather, the imagination of an accountant or executive who has never spent a day working on a retail floor. 

As an experienced retailer, you know that sales by product line vary week to week. But when you're basing operations on an MSL fixed supply chain, the outcome is never ideal. You've either over or under-invested in product SKUs, so each week, you're faced with one of two sad scenarios:

SCENARIO 1: OVERSTOCKS

On slower weeks where your supply is greater than demand, you can keep your customers happy by fulfilling orders. But on this unspectacular week, sales have also been unspectacular — so what will you do with that excess stock?

  • You've invested money that could have gone towards more profitable items
  • You're clogging up warehouse space
  • You now have to sell items a clearance sale prices — painfully reducing your margins

SCENARIO 2: UNDERSTOCKS

On busy weeks, customers are flooding in and buying up stock. At first, you're living the dream. But as demand is greater than supply, stocks soon run out and customers can't buy what they want. Instead:

  • Shelves are empty — say goodbye to sales
  • Customers are disappointed and have a poor customer experience
  • The retailer misses out on much-needed revenue – and it's painful to know that you could have sold double or triple the amount if only you had purchased more.
     

Arm your retail business with POS software with smart algorithms to automate your store replenishment. You'll sell more stock at higher margins, minimise expenses and transform your business. Get a free demo to find out more.

automated stock replenishment to eliminate overstocks and understocks

How automated stock replenishment works

Fortunately, there’s a way out of this miserable cycle. With an Automated Stock Replenishment system, you can manage your reorder levels based on real-world data, factoring in how much has been sold historically. It's an outstanding inventory optimisation tool.

The heart of the system is an algorithm that combines real-time data analysis on key metrics across all your sales channels. Metrics like:

  • Sales daily run rate
  • Supplier lead time
  • Days cover
  • Existing stock in-store
  • On order stock
  • Stock in transit


The algorithm does the hard work for you by:

  • Automating the data analysis
  • Determining the required reorder levels to replenish your stores
  • Determining the optimum inventory to purchase from suppliers

The system can also automate stock transfers from your warehouse to your stores. And it can generate purchase orders that your staff can review before sending to suppliers. 

So, in the time it takes to manage stock transfers and purchasing manually, your algorithm has calculated your entire supply chain, and started providing retailers with the optimal purchase order. It's a far more innovative and successful way to operate your business.

Incidentally, there's no need to worry that the software will take over all decision-making. You remain in complete control of your retail business, and humans are still an essential part of the equation. But now, you'll have the help of a powerful algorithm that can provide automated and suggested replenishment capability to guide your decisions. It's up to you to determine the amount of control required.

Unlike other POS software providers, at Retail Express, an automated replenishment solution is a standard (out-of-the-box) feature of our inventory management software system. What's more, it can be customised to meet your specific business needs.

Read more from the blog: Omnichannel Fulfilment Strategy – Logistics & Fulfilment: a Simple Guide for Aussie Retailers

Benefits of automated store replenishment

Today, every business needs smart eCommerce and omnichannel inventory management software to deliver this all-important automated store replenishment. Make the switch, and you'll enjoy game-changing benefits for your retail business, including:

Revenue growth

  • Minimise the risk of overstocks and understocks
  • Maximise the return on capital investment in inventory
  • Reduce excess stock and the need for clearance sales
  • Minimise stockouts and lost sales


Improved efficiency and effectiveness

  • Make more informed purchase decisions working with accurate data for every single stock item — it's easy to get the right stock in the right store at the right time
  • Free up warehouse space — and only stock what's really required. Plus, you'll boost the capacity of your picking area

Identify issues and anomalies

Say two stores have similar demographics. One is reporting a low run rate on specific products selling well in the other store. Rather than just ordering more stock, you have the tools and smart data to determine the source of the lost sales — and do something about it.

Staff capacity

  • Save up to 50% of labour time currently eaten up through manual purchase administration
  • Enable staff to focus on high-value, profit-building, brand building activities


Improved customer experience

  • Always have stock to meet the demands of your customers week on week.
  • Satisfying your customer demands means building a better brand reputation


Scalable growth

Expand your operation without the need to invest in expensive administrative resources. A new channel won't bring an entirely new set of headaches. It will simply leverage the existing data and algorithm.

Next steps

Arm your retail business with POS software with smart algorithms to automate your store replenishment. You'll sell more stock at higher margins, minimise expenses and transform your business. Get a free demo to find out more.

We make switching to cloud POS easy

Our Retail Express onboarding and support team have all had professional experience as retailers and know the challenges you face. That's why it's our priority to ensure switching to our cloud-based POS software is easy.

  • Personal Support Manager: You'll have your own Australian-based Personal Success Manager who'll guide you through the entire process step-by-step. All costs included. They'll help format and import your data, get you up and running, guide you with your hardware and help with everything else associated with setting up a new system.
  • 5-Star ongoing support: Once you're set up, the support doesn't stop. We're renowned for our Australian-based customer support. Each of our experts has professional retail experience and knows the issues you face. Forget being palmed off to a help manual — you'll be individually cared for until we fix your problem, every time.
  • Knowledge Base, Training Academy & webinars: You'll have access to a comprehensive Knowledge Base with all instructions, a video library, Training Academy and more.

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We make switching to cloud POS easy

Our Retail Express onboarding and support team have all had professional experience as retailers and know the challenges you face. That's why it's our priority to ensure switching to our cloud-based POS software is easy.

  • Personal Support Manager: You'll have your own Australian-based Personal Success Manager who'll guide you through the process step-by-step. All costs included. They'll help format and import your data, get you up and running, guide you with your hardware and help with everything associated with set-up.
  • 5-Star ongoing support: Once you're set up, the support doesn't stop. We're renowned for our Australian-based customer support. Each of our experts has professional retail experience and knows the issues you face. Forget being palmed off to a help manual — you'll be individually cared for until we fix your problem, every time.
  • Knowledge Base, Training Academy & webinars: You'll have access to a comprehensive Knowledge Base with all instructions, a video library, Training Academy and more.
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