Continuous replenishment
Continuous replenishment stands for the continuous supply of goods (replenishment of stock) from a central location. Replenishment is usually carried out directly by the supplier and takes place within the supply chain. The actual impetus for continuous replenishment comes from customer demand or forecast consumer demand.
In order to make the supply chain within the supply chain more efficient and to optimize the availability of goods at the point of sale, continuous replenishment offers the continuous and non-order-related supply of goods. In this process, retailers work with suppliers to map customer demand based on the sales data collected. The supplier can also be the manufacturer at the same time.
Important: In contrast to the Quick Response process, which aims to compare the information of all companies involved in the supply chain, Continuous Replenishment only affects two consecutive companies.
Options for ensuring the continuous supply of goods
- Vendor Managed Inventory: The supplier/manufacturer influences the retailer’s inventory.
- Co-Managed Inventory: The influence on demand is shared.
- Buyer Managed Inventory: The retailer decides on its own inventory.
Why Continuous Replenishment? An example:
The problem of trading:
A product is no longer in stock in a stationary store. The customer now has two options. Either he buys an alternative product or he buys the out-of-stock product from another retailer.
On the one hand, the manufacturer of the product has no interest in the customer choosing an alternative from another manufacturer, and on the other hand, it is not in the retailer’s interest for the customer to go to the competition. Consequently, manufacturers and retailers want to offer the consumer the requested product in sufficient quantities.
A lack of coordination or communication between retailers and producers as well as insufficient demand, order and logistics information must be avoided – otherwise, in the worst case, there is a risk of a so-called bullwhip effect, in which fluctuations in the order and sales forecasts of retailers, manufacturers and suppliers are misinterpreted and can therefore have a serious impact on the continuous supply of goods.
Solution:
As described above, relevant business processes must be worked out in detail and exchanged by suppliers and retailers. This can be achieved, for example, with the EDIfact subset EANCOM, which contains the following message types and information:
- Purchase order
- Stock report
- Sales data report
- Sales forecast
- Delivery notification
- Goods receipt report
Thanks to the constant exchange, the supplier can ensure that the product is always in stock at an early stage, while the retailer can offer and sell its product on a permanent basis and the strategic benefits of both: higher availability of goods (also as replenishment in the warehouse), high service level, higher sales, higher market share and also a long-term business relationship. In addition, there is a high degree of flexibility, as it is possible to react more quickly to fluctuations in sales.
Customer benefits:
The product is permanently available and the cost savings can be passed on to customers as price advantages (customer loyalty) thanks to the short storage periods and continuous sales.
Further information on the subject of goods supply can also be found under Fulfillment and Storage capacity.
Image rights: CC BY-SA 2.0 / Martin Roell