Continuous Replenishment: The Daily Definition
What is continuous replenishment?
Continuous replenishment is a system of reordering inventory based on forecasted demand, rather than economic order quantities. In other words, this is the distributor moving away from the traditional model of inventory replenishment for one that’s more personalized and customer-driven.
The continuous part of this comes into play with the ever-changing nature of your demand. Customers and their preferences are subject to change, so this process often needs to be “continuously” adjusted.
Many of our current users started their businesses selling one type of product and worked to incorporate new ones based on demand. This is the perfect scenario to work with continuous replenishment.
When a product is new, you’re not quite sure how it will sell. If you let your customer demand determine your reorder points for inventory, you’ll know for sure that you’re ordering the right amount, even if it’s not as sustainable of a strategy. As you learn more about the product and your customers’ response to it, you can adjust your ordering strategy.
Our two cents:
While continuous replenishment can be effective, it’s only useful if you’re using it in the right context. The more traditional method usually boils down to ordering inventory based on what will yield the lowest holding cost. This can definitely be a useful method for industries that don’t fluctuate as often, and of course, is a good money-saver.
Continuous replenishment certainly allows more freedom to adjust your orders, but that shouldn’t be interpreted as needing less structure. Your team needs to arm themselves with lots of data and combine forecasting with real demand planning. This way, your replenishment strategy is both flexible and well-informed.
Reinventing your inventory strategy isn’t something you do overnight. We know that it can be overwhelming, so we’re here to help. You can download our ebook on best practices for your warehouse to get started!