Getting ROI from Replenishment

By Eric Lamphier,
Getting ROI from Replenishment

With the rise of e-commerce and increasing customer demands, there have been significant changes to the warehousing and distribution industry in recent years.

Today’s consumer demand to “buy anywhere, ship anywhere” has caused major disruptions to the traditional flow of the supply chain.

As companies begin to adjust to new customer needs and the changing e-commerce landscape, there’s been an increasing demand to fulfill orders faster and more efficiently. In order to do so, today’s companies have devoted more time to tightening their picking processes, but they should also make sure they have a timely and efficient replenishment function in place. Often, replenishment gets less attention than order picking, but it is becoming the next critical target for today’s distribution management executives.

For years, warehouse operations were essentially static in terms of their upstream suppliers and their downstream distribution channels. Standard operating procedures (SOPs), metrics, and KPIs were dialed in. Things like location ratios (reserve storage to forward picking locations) and replenishment processes were well understood and keeping product well positioned in a distribution center wasn’t considered that challenging. Introduce e-commerce into the equation and you will experience explosive SKU catalog expansion and a vastly different order fulfillment process.

For example, it’s not uncommon for hundreds of brand new SKUs to be introduced into a high volume e-commerce operation every week. Coordinating new item data collection, assignment of a forward pick location, and replenishment settings are key steps that need to be accomplished quickly in order to position the operation to ship the new SKUs to their customers. Real-time, single-item location slotting is favored over nightly batch optimization, so that products can be optimally positioned quickly after they have first arrived at the warehouse. Add smaller, more frequent, more diverse incoming shipments to the mix and efficient forward location replenishment becomes even more important to delighting your e-commerce customers.

Numerous replenishment techniques exist, ranging from batch-oriented algorithms that top off forward locations during non-peak shifts, to real-time replenishment triggers that take advantage of event-specific conditions to drive product to a forward location precisely when it is needed and can fit into the location. Another very popular replenishment technique in e-commerce operations is the direct-to-active (DTA) approach where newly received products skip reserve storage in favor of routing directly to the pick location.

In a recent article in Modern Materials Handling, I discuss the evolving industry and how these changes have impacted overall best practices in replenishment. Through proper replenishment solutions, companies can best position their warehouse operations to rapidly fulfill orders across all demand channels. The article highlights ways companies can meet the demands within the industry and adopt new practices to better serve the changing landscape.

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