Article: Replenishment And Inventory Planning

By Vivek Sehgal, Supply Chain Musings

This article discusses how the replenishment and inventory planning processes are related. It explains the available options for replenishment and how inventory planning can make it more efficient by correctly computing optimal safety stock levels.

The two processes of replenishment and inventory planning are closely related. The inventory planning process establishes the optimal inventory levels that must be maintained to meet expected service levels for demand fulfillment. What does that exactly mean? To understand, we need to first explore the replenishment (or re-ordering) process. In doing so, we will also establish the decision parameters an inventory planning process provides for the replenishment to work at its most optimal levels.

As orders are fulfilled, the inventory of an item depletes at the fulfilling location. When the inventory falls below a certain predefined level, the reordering process kicks in to replenish the inventories. This process needs to define a review period and an ordering quantity. Then, it also needs the inventory stocking levels to determine whether an order for replenishment should be placed at the time of review or not.