Retail Replenishment Strategy

Retail Replenishment Strategy from A Turn Key Solution | Supply Chain Consultants | Logistics Consultants

By: A Turn Key Solution | Supply Chain Consultants | Logistics Consultants  16-Nov-2010
Keywords: Logistics, Supply Chain, Inventory Management

Retail Replenishment Strategy
At all stages of the supply chain, the right replenishment strategy will depend on the following factors: constraints, lead-time, promised service level and inventory  policy.  

The challenge for a retail supply chain is to implement the right replenishment strategy that balances tradeoffs at each stage of the supply chain delivering the highest service level at the lowest possible cost.

This is achieved by implementing any of the following strategies for your retail supply chain.

Retail Push versus Pull Strategy

The PUSH method is typically a centralised planning process which allocates inventory based on aggregated forecast demand for a number of stores. Although the push method can create operational challenges when allocating stock for standard items, it is more suited to allocating stock for:
- planning (1st time distribution),
- Point of Sale and marketing collateral,
- Run out stock, clearance lines etc.

The PULL method is one which tends to operate better for retail store environments where the sale is a trigger point for replenishment and calculated from number of algorithms that the system generates. Optimisation is achieved when items are rounded to pack qty’s and unit loads, rather than sell one v replace one.

Pull Systems for a retail store

Sell One Replace One - As products are scanned at the store till(s), the sales data is polled at regular intervals and then transmitted to the main enterprise system. An automatic replenishment order is generated for the relevant items which are picked and despatched to the store(s). Depending upon the type of stock being replenished, this method tends to have the highest cost to serve.

Min/Max replenishment - This method requires each item to have a set minimum and maximum level for replenishment. When the minimum level is reached, a replenishment order is generated automatically. By rounding the pick requirement to a pack size, resource utilisation is more effective along with speed to floor. The challenge is always around matching shelf capacity and presentation. As the item may be occupying several locations within a store, excess stock or lower stock levels can occur due to the high sell through rate during the replenishment cycle.

How to be a Successful Retailer

Supply Chain Integration is the key to success in managing an effective replenishment strategy for a retail environment.

A retail supply chain is the most challenging to manage for many organisations as operations staff are working in a dynamic environment where customers needs change constantly. The following components are essential:
Inventory policy - This needs to incorporate all items expressed in units and dollars for each store and aggregated for the entire business unit.

Forecast or Open to Buy - This involves calculating net requirements which are an outcome of the inventory policy less existing stock on hand or stock in transit and sales/returns. Lead-times by supplier are also taken into account and orders are released typically at monthly intervals to adhere to the inventory policy.

Launch or Promotions plan - These items are part of the inventory policy and represent new product introductions to a product portfolio. Most large organisations have global marketing teams who develop a market allocation by region which is typically a percentage derived from “like products” or based on other market intelligence. we would recommend that Launch/Promotions plan be a separate planning process as it is complex and specialised, given that it also involves management and coordination of marketing collateral.

Range Plan - It is a detailed store layout of all product fixtures, shelves, end caps etc that effectively store stock for sale. Fixtures are to be placed in the most suitable positions within the store to generate maximum exposure and return on investment. For efficiency, each facing to hold a multiple of boxes, inner cartons or outers.

Replenishment Model - Selecting the right model is important for your business. Ensure to trial several alternatives before the final replenishment strategy is deployed.
At all stages of the supply chain, the right replenishment strategy will depend on the following factors: constraints, lead-time, promised service level and inventory  policy.  The challenge for a retail supply chain is to implement the right replenishment strategy that balances tradeoffs at each stage of the supply chain delivering the highest service level at the lowest possible cost.

This is achieved by implementing any of the following strategies for your retail supply chain.

Retail Push versus Pull Strategy
 
The PUSH method is typically a centralised planning process which allocates inventory based on aggregated forecast demand for a number of stores. Although the push method can create operational challenges when allocating stock for standard items, it is more suited to allocating stock for:
- Launch planning (1st time distribution)
- Point of Sale and marketing collateral
- Run out stock, clearance lines etc.

The PULL method is one which tends to operate better for retail store environments where the sale is a trigger point for replenishment and calculated from number of algorithms that the system generates. Optimisation is achieved when items are rounded to pack qty’s and unit loads, rather than sell one v replace one.

Pull Systems for a retail store:
Sell One Replace One - As products are scanned at the store till(s), the sales data is polled at regular intervals and then transmitted to the main enterprise system. An automatic replenishment order is generated for the relevant items which are picked and despatched to the store(s). Depending upon the type of stock being replenished, this method tends to have the highest cost to serve.

Min/Max replenishment - This method requires each item to have a set minimum and maximum level for replenishment. When the minimum level is reached, a replenishment order is generated automatically. By rounding the pick requirement to a pack size, resource utilisation is more effective along with speed to floor. The challenge is always around matching shelf capacity and presentation. As the item may be occupying several locations within a store, excess stock or lower stock levels can occur due to the high sell through rate during the replenishment cycle.

How to be a Successful Retailer
Supply Chain Integration is the key to success in managing an effective replenishment strategy for a retail environment.A retail supply chain is the most challenging to manage for many organisations as operations staff are working in a dynamic environment where customers needs change constantly. The following components are essential:

Inventory policy - This needs to incorporate all items expressed in units and dollars for each store and aggregated for the entire business unit.

Forecast or Open to Buy - This involves calculating net requirements which are an outcome of the inventory policy less existing stock on hand or stock in transit and sales/returns. Lead-times by supplier are also taken into account and orders are released typically at monthly intervals to adhere to the inventory policy.

Launch or Promotions plan - These items are part of the inventory policy and represent new product introductions to a product portfolio. Most large organisations have global marketing teams who develop a market allocation by region which is typically a percentage derived from “like products” or based on other market intelligence. we would recommend that Launch/Promotions plan be a separate planning process as it is complex and specialised, given that it also involves management and coordination of marketing collateral.

Range Plan - It is a detailed store layout of all product fixtures, shelves, end caps etc that effectively store stock for sale. Fixtures are to be placed in the most suitable positions within the store to generate maximum exposure and return on investment. For efficiency, each facing to hold a multiple of boxes, inner cartons or outers.Replenishment Model - Selecting the right model is important for your business. Ensure to trial several alternatives before the final replenishment strategy is deployed.

For more information contact or email

Keywords: Demand Planning, Inventory Management, Logistics, Logistics Consulting, Logistics Solutions, Supply Chain, Supply Chain Consultants, Supply Chain Logistics, Supply Chain Planning

Contact A Turn Key Solution | Supply Chain Consultants | Logistics Consultants

Email

Print this page

Other products and services from A Turn Key Solution | Supply Chain Consultants | Logistics Consultants

Warehouse Assessments from A Turn Key Solution | Supply Chain Consultants | Logistics Consultants thumbnail
07-Nov-2011

Warehouse Assessments

A poorly designed warehouse can be typically constrained by the type of building you occcupy. The column positions that support


Warehouse Relocation from A Turn Key Solution | Supply Chain Consultants | Logistics Consultants thumbnail
06-Oct-2010

Warehouse Relocation

  We are a team of logistics professionals who provide a full turnkey solution for any organisation that needs to


Inventory Management from A Turn Key Solution | Supply Chain Consultants | Logistics Consultants thumbnail
06-Oct-2010

Inventory Management

  Based on your business, we aim for a 20 - 45% reduction on your inventory investment.


Demand Planning from A Turn Key Solution | Supply Chain Consultants | Logistics Consultants thumbnail
06-Oct-2010

Demand Planning

  A Turn Key Solution will develop and implement a rules based demand management and demand planning process for your


Improve your Inbound Logistics from A Turn Key Solution | Supply Chain Consultants | Logistics Consultants thumbnail
06-Oct-2010

Improve your Inbound Logistics

  We view this in two segments:   Involves the management and coordination of procured products from local or imported


Sales and Operations Planning from A Turn Key Solution | Supply Chain Consultants | Logistics Consultants thumbnail
06-Oct-2010

Sales and Operations Planning

  “A Turn Key Solution” are specialists in supply chain optimisation . In a manufacturing organisation, optimisation is achieved through


Project Management from A Turn Key Solution | Supply Chain Consultants | Logistics Consultants thumbnail
06-Oct-2010

Project Management

  We offer our clients a unique opportunity to work with one company that provides a total project management service


Warehouse Relocation from A Turn Key Solution | Supply Chain Consultants | Logistics Consultants thumbnail
06-Oct-2010

Warehouse Relocation

  We offer our clients a unique opportunity to work with one company that provides a total project management service


Improve Warehouse Productivity from A Turn Key Solution | Supply Chain Consultants | Logistics Consultants thumbnail
06-Oct-2010

Improve Warehouse Productivity

  We have helped a number of companies like yours to achieve major cost-reduction solutions to their warehouse operations.


Project Delivery from A Turn Key Solution | Supply Chain Consultants | Logistics Consultants thumbnail
27-Dec-2009

Project Delivery

We are a professional services delivery organisation that is results driven