The warehouse replenishment process pushes managers to walk a very thin line between understocking and overstocking. Failure to replenish inventory properly can stem from not having the right tools, unpredictable markets, and a lack of performance measurements in place.
So, here are some of the best practices and tools that warehouse managers can use to optimize their inventory replenishment process and increase efficiency.
Replenishment Process Objective
Managing warehouse replenishment means ensuring that each picking location contains the optimal quantity of products for a smooth and efficient picking process. It is the movement of inventory from upstream (reserve) product storage locations to downstream (primary) picking storage locations.
An empty picking slot equates to an empty shelf location in a store, which leads to lost sales. For the warehouse, failing to replenish properly results to order shortages, inaccurate stock count, and an overall reduction in service level.
How to Optimize the Replenishment Process:
1) Install a Real-Time WMS
Using a real-time WMS will be the biggest factor in optimizing the replenishment process. A WMS can detect in real time the need to replenish pick locations by comparing total order quantities with stock availability. Once a need for replenishment is detected, the software will request the needed stocks before the next wave of orders arrive. This method relies on a pre-defined/time-sensitive trigger (stock levels) to avoid early or late replenishments.
Early replenishment happens when replenishment occurs before the generated pick lists have been executed. Conversely, late replenishment happens when the next batch of picking occurs before the replenishment team has restocked the pick location. Correct process sequencing is therefore paramount for this method to work.
2) Barcode Scanners, Mobile Computers, and RFID
The use of warehouse technologies such as barcode scanners, mobile computers, and RFID will also help you to optimize the replenishment process and increase accuracy.
Barcode scanners are a relatively inexpensive and effective way to move from the unreliable pen-and-paper model to a more updated warehouse replenishment process. Scanning barcodes, which contain the SKU information, reduces human error such as inputting an incorrect number for stock added or deducted. It is also a faster input method versus writing, which results in greater efficiency.
Mobile computers, used together with barcode scanners, create a fully mobile replenishment operation. When both are integrated with the WMS, it allows for the transfer of information back and forth wirelessly. This significantly reduces walking times by removing the need to access data at fixed workstations.
And lastly, tagging RFIDs on inventory further optimizes the replenishment process by eliminating the need to scan one at a time. The tags can be attached to every piece and be read all at once by an RFID reader. This allows for real-time inventory of all cargo with minimal margin of error.
3) Implement Predictive Analytics
Predictive analytics provide a fair estimate of sales per day, which tells you the expected quantity of product to be picked. Implementing a forecasting model can be complicated due to demand and seasonality, but a paper called “An Expert System for Inventory Replenishment Optimization” by Ander Errasti, Claudia Chackelson and Raul Poler provides a helpful table for choosing the best forecasting method and replenishment strategy.
They use two factors, consumption (A being highest, C being lowest) and predictability (X for regular, Z for irregular) to determine the best method. In their study, following this table reduced stock-out situations by up to 88%.
4) Set Realistic KPIs
Setting warehouse KPIs is standard practice to measure performance in order to improve operations. But more importantly, setting realistic and achievable but challenging KPIs is important to keeping employees motivated. Here are some of the basic KPIs to measure the replenishment process:
a. Replenishment Time – This KPI measures the average time spent per pallet moved in the replenishment process. It is arrived at by taking the total time it took to move each pallet from the reserve storage area to the forward pick area and dividing it by the total number of pallets moved.
b. Replenishment Productivity – This KPI quantifies the productivity of the replenishment process by dividing the total number of pallets moved by the total number of labor hours worked.
c. Replenishment Accuracy – This KPI assesses the accuracy of the replenishment process by dividing the number of pallets moved correctly by the total number of pallets moved.
5) Other Replenishment Process Tips
Direct to Pick Face
By coordinating the delivery quantity with the supplier, products can be directly moved from the inbound section to pick face without overfilling. This cuts out a number of processes, which saves time, effort, and warehouse space cost.
In the case of not having a WMS…
Ensure that the pick faces are designed to hold the optimum quantity of products based on predicted sales per day. Staff will need to be prompted manually to identify the replenishment quantity when WMS is not in place.
Increase Rack Capacity
If a certain SKU has a large amount of demand that requires multiple replenishments in a day, consider using bigger or multiple picking locations. This will reduce replenishment instances, which then reduces the chance of replenishment error.
Don’t Forget to Optimize for Safety
Real-time warehouse replenishment means that replenishment and picking can occur at the same time. This creates the chance that forklift trucks and pedestrian pickers could collide, creating safety hazards.
This can be alleviated by having multiple picking locations for the same SKU, making picking possible during replenishment. It can also be alleviated by scheduling the activities at different times of the day.
For more warehouse safety tips, click here.
Optimizing the replenishment process can be approached in a technological way or by making operations leaner. Warehouse technologies are likely to be a good investment, especially in the takeoff stage, for you to be on top of this growing industry. If you have reservations about technology investment, making operations leaner will also work — but only up to a certain point.
Hopefully, this set of best practices can help you achieve the efficient warehouse replenishment process you’re aiming for and consequently a successful and profitable warehouse.
If you have more warehouse challenges that needs solutions, feel free to message us here. We’ll be very glad to help.