Stock Replenishment

Purchase & Materials Management
Stock
Replenishment
Anantha Krishnan P Ramesh
Sahal T Youseph
Vishnu K
Stock replenishment also known as
inventory replenishment entails moving
items along the supply chain at an optimal
rate to meet customer demand on time
and keep inventory costs low.
What is Stock
Replenishment?
Why Stock Replenishment is
important?
Helps avoid stockouts
Improves customer satisfaction
Prevent overstocking
Lowers shipping cost

Sales that deviate from
Factors impacting
Stock the forecast
Replinishment Limited warehouse space
Supply chain lead time

Demand Driven Material
Requirements Planning(DDMRP)
Methods of Stock
Replenishment
Periodic ReOrder Point Top Off Method Demand

Method Method Method
Reorder Point Strategy
Select a stock level that signals when it’s time to
reorder inventory.
if you stock 1,000 pillows, you may set your reorder

point to when 200 pillows remain in your inventory.
Now that you have your minimum, you need to set a

maximum inventory level to prevent overstock.
Inventory levels are continuously reviewed to trigger

replenishment when inventory falls below the
minimum threshold.
Take your minimum (200) and subtract it from your

max (1,000), which results in an order quantity of 800
pillows.
Periodic Strategy
With the periodic strategy, inventory is
replenished at specific intervals.
For example, every three months, the inventory
manager looks at the levels to see if they need
replenishment. If the inventory levels are still
fine, then the inventory manager doesn’t reorder
anything.
Even if your inventory runs out before that point,
using a periodic strategy, he would not re-order
until the cycle ends.
Replenishment orders are placed only at the pre-
determined review points.
Top-off strategy
Also known as lean time replenishment, the top-
off inventory replenishment strategy involves a
much more fluid and opportunistic approach.
It involves restocking inventory levels at
opportune times when demand slows down,
bringing inventory forward into primary storage
to ‘top-off’ the primary inventory levels.
It’s typically used in high-velocity sectors where
it’s critically important to have healthy inventory
levels when demand spikes, minimizing the
chance of stock levels being low at the wrong
time.
Demand strategy
Replenishment is directly correlated with
demand. Restocking or reordering is limited
only to the items that are required to fulfill
the demand.
Careful planning ensures that you’re
prepared to meet future demand
fluctuations.
You’ll need to have a safety stock to make
your business agile enough to meet these
changes in demand. Safety stock is a stock
buffer that allows your business to adapt to
random fluctuations in supply and demand,
lowering the risk of stockouts if there’s a
sudden spike in demand.
How does the inventory replenishment chain fuction
Regular stock counting
Demand forecasting
Reliable Suppliers
Determine accurate lead
Best Practices For
times
Stock Replenish inventory from
Replenishment within the business
ABC analysis (a.k.a
Contribution codes)
Fixed Order Quantity:
Economic order quantity
Lot Sizing Lot for Lot
Period of Supply
Methods
Least unit cost
Least total cost
Period order quantity
Past period balancing
In the Fixed Size Ordering
System, the maximum and
minimum of standard
inventory quantity are defined
Fixed Order in advance, and the quantity
Quantity of inventory gradually
decreases, and when the
number reaches ROP (Reorder
Point, or also just simply OP),
an order of EOQ (Economic
Order Quantity) is placed.
The economic order quantity (EOQ) is a
company's optimal order quantity that meets
demand while minimizing its total costs
related to ordering, receiving, and holding
inventory.
The EOQ formula is best applied in situations
Economic Order where demand, ordering, and holding costs

remain constant over time.
Quantity One of the important limitations of the
economic order quantity is that it assumes the
demand for the company’s products is
constant over time.
When planning using lot-for-lot
order quantity, the system
uses the exact shortage
quantity (requirement minus
available stock) as the order
Lot for Lot quantity in the case of a
material shortage. At the time
of the requirements date, the
planned plant stock is zero.
Planning is carried out daily.
The period order quantity is a
standard number of units to
be ordered over a fixed
period of time. This approach
Period Order is used when the amount of
Quantity raw materials or supplies
usage is consistent and
predictable.
A class items are few in
numbers (around 20%) but
have the highest consumption
value (ca. 80% altogether).
C class items are many in
numbers (about 50%) but
have a low consumption value
ABC technique (ca. 5% altogether).
B class items fall between the
two aforementioned
categories (making up about
30% of the items with around
15% of the consumption
value).
ABC technique
ABC technique

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Purchase & Materials Management

Helps avoid stockouts

Improves customer satisfaction

Lowers shipping cost

Replinishment Limited warehouse space

Supply chain lead time

Periodic ReOrder Point Top Off Method Demand

if you stock 1,000 pillows, you may set your reorder

Now that you have your minimum, you need to set a

Inventory levels are continuously reviewed to trigger

Take your minimum (200) and subtract it from your

Economic Order where demand, ordering, and holding costs

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