Restocking Inventory is one of the crucial processes of any order-fulfillment, and it is not as simple as it sounds.
There are various factors that must be kept in mind while restocking inventory such as what, when, and how to restock. Moreover, it is better to use a method that is profoundly effective and best suits your business.
Now, you must be thinking about which method is beneficial for your business. Relax! Let’s dive into different restocking methods and find the one best for your business type!
Table of contents
Periodic Restocking Method
As the name suggests, this method calls for inventory restocking after a set period e.g., each month, quarter, or year. In this inventory valuation method, stocks and their costs are not updated in accounting records after each purchase.
Even when the inventory count suddenly dips, replenishment of goods doesn’t happen until the designated period has passed.
It is one of the easiest methods to implement and requires minimal data. However, it does not implement real-time inventory tracking, which makes it harder to keep an account of inventory and forecast.
Top-Off Restocking Method
Also known as Lean Time Replenishment, it takes advantage of the time when picking operations are slow to bring the stock back to acceptable levels in multiple forward pick locations.
This method improves efficiency during peak periods as the inventory is restocked during less active hours.
It is one of the best methods for retailers because it is the most efficient way to restock the fast-moving SKUs.
Reorder Point Method
A reorder point is the minimum level set by you for the replenishment of a product. It is an indicator to restock the items that are finishing. Once the point is hit, you can reorder the product from your supplier for the fulfillment of future orders without a halt.
As you have a minimum level set in this method, you can also set a maximum level to save yourself from overstocking.
For this method, you need a robust IT system to continuously monitor your inventory in real-time.
Demand Restocking Method
This method is simple: replenishment is based on demand. Products that are high on demand get restocked, which means that other slow-sellers might not be given a priority.
This method is not as simple as it sounds. It requires careful pre-planning and forecasting to avoid any losses in the future. It needs a system that updates data in real-time and helps you in forecasting with demand analysis.
Demand restocking is best for seasonal products due to the high demand for seasonal items only during a particular time of the year. However, it is advisable to keep some safe stock so you can easily adapt to the market fluctuations and keep a good balance between supply and demand.
Every Business Needs a Different Inventory Restocking Method
The periodic replenishment method works best for companies with predictable demand cycles.
For businesses with high-velocity SKUs or SKUs with fluctuating demand, the reorder point method may work better.
Some companies use a combination of replenishment methods for different product lines, or they can also shift to a different method during peak demand periods.
Moreover, when a business is at the initial stage, they often use a periodic inventory method. However, as the business grows, it might need technology and automation tools to optimize inventory operations and track the inventory in real-time to meet the market’s demands.
Choosing the right replenishment strategy for your business is crucial to maintain smooth order-fulfillment operations.
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