What is the best approach to restocking inventory? Many consumers working in a retail or e-Commerce business choose to replenish inventory based on expected sales projections or the actual demands of customers. Both schools of thought have their advantage, but the bottom line is all about understanding the needs and preferences of your target audience.
Following is a rundown on these two methods of inventory replenishment as well as some important considerations for choosing one over the other.
The Push System — Working from Sales Forecasts
The first way to replenish your inventory is by relying on the data from your inventory management system to produce a forecast of demands you can expect from your consumer pool at different times and seasons. This will show you what needs to be replenished and how often.
The strategy behind this approach is general and provides comprehensive solutions to replenishing stock. This often results in replenishment orders that are not as sensitive to the more subtle differences in consumer demands that can fluctuate unexpectedly.
The primary advantage of this method of inventory replenishment is convenience. Nevertheless, these forecasts are only as good as the data used to produce them. Today’s inventory management systems are far more efficient than they were half a year ago. They are now capable of producing very accurate forecasts that take a plethora of aspects into consideration.
But even the best forecasts are still subject to the unpredictable trends and can sometimes contain errors, if they are not completely inaccurate.
The Pull System — Working from Customer Demand
Another system of replenishing needed stock is with the pull system that uses the daily demands of the consumer to forecast needed replenishment. Figures are collected from across the various sales outlets and used to determine the immediate or short-term needs for replenishment. This means replenishment must be done frequently, but has the added advantage of reducing the costs of inventory management.
Another advantage of the Pull System is that the predictions made for individual items can be done with improved accuracy. This means instead of replenishing your entire stock of products, only those that need to be replenished to balance supply and customer demands are ordered. The idea is that items are replenished as they are sold, which makes it is a great way to reduce the costs of inventory and avoid the waste associated with being overstocked.
While the Push system has been in effect throughout the world in retail businesses of all sizes, many savvy retailers are switching to the Pull system that maintains an easily manageable inventory level while reducing many of the expenses associated with being over-or under-stocked.
The Pull System of inventory replenishment can only be successful if based on data from a reliable inventory management software solution. A modern inventory management system, like DataQlick, provides the crucial data necessary for making accurate decisions about “ideal” inventory levels and which items need to be replenished — which will allow you take full advantage of the economizing power of the Pull System.