The Benefits of Automated Stock Replenishment

Learn how automating replenishment increases business profitability.

The importance of consistently replenishing all stores and online channels with optimum inventory levels has never been more important for Australian & New Zealand retailers. A laser-like focus needs to be applied to avoid under-stocking (lost sales and customer frustration) or over-stocking (wasted investment) mistakes for every single product in their portfolio.

In order to outdo global online giants like Amazon, retailers need to make sure they can provide consumers with consistent, reliable local store product availability (and the associated experience) and rapid fulfilment capability for online orders. (One way the latter can be achieved is by leveraging all your in-store inventory for online orders and to provide a Click & Collect option. However, this also relies on ensuring stores are adequately stocked by employing systems that replenish from the most suitable location based on real-time data).

Stock replenishment plays a strategically critical role in minimising the time lag that increasingly demanding consumers need to wait for the products they want.  Unfortunately, many multi-store retailers are still basing reordering decisions on gut instinct or falling for traps such as:

  • Buying items because a supplier offers a discounted price when buying more
  • Allowing suppliers to influence inventory, letting them re-order for you when in store
  • Purchasing the same quantity of items no matter what size, colour etc
  • Delegating buying decisions to Store Managers without arming them with the right knowledge and tools.

Manually managing stock replenishment across multiple stores and locations can be time-consuming and resource-intensive, and the likelihood of making errors is extremely high. Typically this means that increasing your stores and channels also results in the need to add extra resourcing to manage inventory and replenishment. This is not a scalable system for growth.

Instead, retailers should be analysing their reorder levels based on real world data, factoring in how much has actually been sold historically. Automating this data analysis and the subsequent purchase order process for stock replenishment has many benefits, including increased efficiency and revenue. It allows the hard work to be done for you by identifying the required reorder levels, and then automatically generating purchase orders that can be reviewed before they are sent to suppliers. A retailer can expand their operation without needing to increase their investment in resources. Retail Express offers an automated stock replenishment solution — an intelligent reordering process that automatically creates the purchase orders for your suppliers for you to review before sending them. Retailers have the option of automating their purchase orders based on several formula types:

  • Daily Run Rate formula that uses a unique algorithm factoring in average quantity sold per day, inventory already on order, current stock transfers (inventory in transit from other stores) and supplier lead time to automatically calculate the optimum quantity to reorder  
  • Previous Sales Periods - reorder the same quantity as sold in a previous sales period - this is effective for products that are highly seasonal or indenting inventory management
  • Minimum Stock Levels (‘Safety Stock’) - the quantity of your core inventory you wish to have on hand at all times - a more manual method but one that can still be informed by the powerful analytics in Retail Express to derive the required minimum stock level

Here are the top benefits of automated stock replenishment:

  • Reduces purchase order administrative and processing costs - no manual purchase orders need to be generated
  • Improves stock rotation — reduces slow-moving inventory, and provides more space to display fast-moving inventory.
  • Provides flexible reporting — provides comprehensive reporting that provides clear measurement and tracking.
  • Provides a superior customer experience — ensures supply matches customer demand
  • Increases your cash flow by better optimising your inventory spend

The types of retailers that benefit most from implementing an automated replenishment system are generally those where:

  • Product availability is low, and Clearance Sales are high due to overstocks, resulting  in markdowns and waste
  • There is considerable employee resourcing consumed with manual replenishment ordering (expansion of operations constantly requires more investment in resources to manage)
  • A significant amount of investment is tied up in inventory, which could be allocated elsewhere
  • Replenishment expenses are high and need to be reduced

References:

  1. eXPD8 Analytics, The Benefits of an Automated Stock Replenishment System, 2018

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