{"id":23014,"date":"2019-11-06T07:41:40","date_gmt":"2019-11-06T12:41:40","guid":{"rendered":"https:\/\/planningposts.com\/?p=23014"},"modified":"2025-09-15T19:19:31","modified_gmt":"2025-09-15T23:19:31","slug":"replenishment-optimization-5th-essential-step-to-expert-demand-planning","status":"publish","type":"post","link":"https:\/\/blueridgeglobal.com\/blog\/replenishment-optimization-5th-essential-step-to-expert-demand-planning\/","title":{"rendered":"Replenishment Optimization: 5th Essential Step to Expert Demand Planning"},"content":{"rendered":"

\"wine-and-spirits-supply-chain-solution\"<\/a>Manage Replenishment So That it Doesn’t Manage YOU<\/strong><\/p>\n

Maintaining a proactive, accurate order quantity is the end result of great inventory component management. Thanks to replenishment optimization technology, what used to be a function of tireless hours spent each day manually constructing orders is now a swift and efficient part of a demand planning professional’s morning.<\/p>\n

Our ‘7 Essential Steps’ series<\/a> continues today with #5 – Replenishment Optimization. The order quantity for replenishment is actually the calculated result of the first 4 steps to expert demand planning:<\/p>\n

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  1. Demand Forecasting<\/li>\n
  2. Lead Time Forecasting<\/li>\n
  3. Order Cycle Optimization<\/li>\n
  4. Service Level Management<\/li>\n
  5. Replenishment<\/strong><\/li>\n<\/ol>\n

    For long-tenured demand planners and inventory analysts, this smart replenishment optimization process is a dramatic change from the old-school, tactical ways of sitting down to build an order. Their role has changed from building the order quantity<\/em> to managing the key components,<\/em> which are used to create replenishment order quantities for any type of item from wine and spirits<\/a> to HVACR<\/a> parts to furniture.<\/p>\n

    Today\u2019s advanced replenishment optimization<\/a> solutions streamline this process and ensure that each of the first 4 components are calculated using advanced science and proven techniques, including AI and machine learning. Even price optimization solutions<\/a> are being woven into the demand planning story to further refine financial results. And take charge of replenishment.<\/p>\n

    \"replenishment-optimization-solution\"<\/a>The Replenishment Process<\/h3>\n

    So what’s the process? How do you properly manage the 4 key components so that daily replenishment becomes a smooth and automated review process? Start your replenishment strategy by proactively applying science to Steps 1-4:<\/p>\n

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    1. Demand Forecasting:<\/strong><\/a> What are your customers’ buying patterns? What influences them to buy? Science can help you simulate these needs, respond to rapid demand fluctuations, incorporate market knowledge and human input, identify and capitalize on opportunities affecting particular categories and locations.<\/li>\n
    2. Lead Time Forecasting:<\/a>\u00a0<\/strong>We all know the impact of long lead times. Science can help by combining lead time history, demand deviation and seasonality with real-time analysis. So you can understand the reliability of suppliers and put inventory behind the winning SKUs.<\/li>\n
    3. Order Cycle Optimization:<\/a>\u00a0<\/strong>Science helps you quickly see the economics of slow-moving, low-cost items, combined with intelligent buying multiples, to achieve the most effective order cycle possible.<\/li>\n
    4. Service Level Management:<\/a>\u00a0<\/strong>Supply chain planning algorithms calculate a safe amount of inventory to protect against the inherent forecast error you face every day. This ensures the forecast is maintained regularly, seasonal profiles are applied when needed, and proper adjustments are made when called for.<\/li>\n<\/ol>\n

      Each day, those elements will combine to build precise replenishment orders. A replenishment optimization solution makes it super easy and efficient to aggregate data and build final order quantity that will deliver the best financial outcome.<\/p>\n

      Two Key Questions: How Much to Buy and When?<\/h3>\n

      The first 4 elements make up the decision of how much<\/em> to buy, but they also make up the critical decision of when to buy<\/em>. You have to keep all elements updated at all times so that they can trigger a replenishment order on time.<\/p>\n

      In the Dinosaur Days…<\/strong><\/p>\n

      You’d sit down to create an order, then realize that the supplier had been taking 5 days longer than normal. You learn from this. And next time, you’d buy more. Or maybe buy 5 days earlier. In either case, you’re giving up margins which – as a distributor – you don’t have much of these days!<\/p>\n

      When to Buy?<\/strong><\/p>\n

      Is an order needed today? To answer this, FIRST, assemble the 4 calculated components for each item:<\/p>\n

      Demand Forecast, Safety Stock, Lead Time Forecast, Order Cycle<\/strong><\/p>\n

      THEN build your Low-Stock Point (Reorder Point) and Order-Up-To-Level:<\/p>\n

      LSP = Safety Stock + Lead Time\u00a0\u00a0\u00a0\u00a0 OUTL = Safety Stock + Lead Time + Order Cycle<\/strong><\/p>\n

      NEXT, compare the Stock Status balance to the LSP for each item and the line collectively:<\/p>\n

      Stock Status Balance = On Hand + On Order \u2013 Backorder\/Reserve <\/strong><\/p>\n

      We’ve shown<\/a> this diagram before, but it’s sharing again for context. Each dot on the Depletion Chart is the balance of an item:<\/p>\n

      \"order-cycle-optimization\"<\/a><\/p>\n

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      NEXT, analyze the supplier picture as a whole:<\/p>\n

      Retail and wholesale distribution businesses are very different from manufacturers. You have to review and replenish \u2018joint orders\u2019 including all of the active items offered. It’s too expensive to place unique orders for individual items each day.<\/p>\n

      The Depletion Chart above displays all of the items in one supplier line. It includes:<\/p>\n