Replenishment
Retail replenishment replaces sold stock in time for the next sale, through a shelf refill, a transfer or a new supplier order.
- Is
- Replacing sold stock in time for the next sale: a shelf refill, a transfer or a new order.
- Formula
- Reorder point = expected demand during lead time + safety stock.
- Watch for
- Ordering again without counting stock already on order or in the back room.
Updated
Meaning / 01
What it means for retail and category teams
A replenishment decision asks what quantity to move or order, where it needs to go and when it must arrive. The starting point is expected sales during the delivery lead time, plus any safety stock, less usable stock on hand and confirmed stock on order. A shelf can also need replenishing while the store still has units in the back room.
Stakes / 02
Why it matters
Replenishment keeps a repeatable product available without filling every location with excess stock. A late order can create a stockout even when the forecast was sound; an oversized order can sit for weeks and need a markdown. Check the supplier's actual lead time and the stock already due before placing another order.
Example / 03
Illustrative example
The business and figures are illustrative. None of it is customer data.
| On the shelf | 18 |
|---|---|
| In the back room | 12 |
| Confirmed transfer, due next week | 25 |
| Reference | Next two weeks' sales: 40 |
| Result | Refill the shelf; no new order |
55 units against 40 of demand: another order now would only add overstock.
Read the example as text
A store sells 20 bags of coffee a week, so it needs about 40 over the next two weeks. It has 18 on the shelf, 12 in the back room and 25 on a confirmed transfer arriving next week: 55 in all. The shelf needs refilling from the back room today. Another order would arrive no sooner than the transfer and add 15 or more bags of overstock.
Work through the calculation
Reorder point = expected demand during lead time + safety stock
Try your own figures and see a fuller worked example on the replenishment calculator.
Questions / 04
Common questions
How do you calculate a reorder point?
Multiply expected weekly demand by the delivery lead time in weeks, then add safety stock. A line selling 20 a week with a one-week lead time and 10 units of safety stock has a reorder point of 30: order when stock on hand plus stock on order falls to 30.
What is the difference between min/max, reorder point and periodic review?
Min/max orders up to a maximum level whenever stock falls to a minimum. A reorder point triggers an order at a set stock position and sizes the order separately. Periodic review checks stock at fixed intervals, such as weekly, and orders up to a target level each time. All three need an honest lead time and a count of stock already on order.
What is safety stock?
Safety stock is extra stock held to cover demand above forecast, or a late delivery, during the lead time. More safety stock lowers the chance of a stockout and raises the cash and space tied up, so it is usually set higher for lines where running out costs the most.
Related / 05
Related concepts
Next step
Work through a replenishment decision
Bring a product, its sales rate and delivery lead time. We can look at when and where stock needs to move.
