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Retail planning and replenishment: How DRP can provide a competitive advantage

In the daily struggle to increase sales and achieve greater profitability, one of the biggest challenges for retailers is to balance the internal chain. Who wouldn't want to ensure better availability and have higher turnover, while reducing inventory levels? Every company wants that.However, to reach this level, there are practices, processes and indicators that must be aligned and in accordance with best market practices. The way the retailer supplies the network, for example, has a direct impact on the inventory balance at distribution centers and stores<h2>7 best practices in the distribution and replenishment planning process</h2>We have listed 7 best practices in this post, and we want to share them with you to help you achieve the best results. Check them out!<h3>Guarantee low out-of-stock levels</h3>Here the rule is simple and straightforward. Less out-of-stock on the shelves is better. A retailer sells 10 brands of 500 ml bottled water and one of these brands is out of stock, therefore, the out-of-stock indicator of that product is 10%.In this logic, levels of up to 10% are considered reasonable, but they need to be constantly addressed so that they are reduced as much as possible. If your company has levels higher than 10% and even 20%, it is necessary to raise a red flag.<h3>Ensure low excess inventory levels</h3>For excess inventory, the same rule that we mentioned for out-of-stocks applies: less idle products is better. Levels above 10% and 20% mean that your company has a very high volume of fixed capital in its inventory, which harms cash flow, working capital and even investments, not to mention problems related to product assortment and mix.So, a mantra for your operation is to ensure safe levels of excess inventory. Of course, ideally, you wouldn't have any, but we know how difficult this is to achieve.<h3>Have a proper process for replenishing the network</h3>Distributing and redistributing inventory among distribution centers and stores are essential practices for retailers to be more sustainable. Often, what is missing in one POS is in excess in another.So, you should always look at inventory levels and balance these levels before committing capital to new batches. If you don't, you could end up suffering from excess and out-of-stock.If one of your stores has high demand for a product and that item is close to out-of-stock, look at the inventory level at other stores and DCs before placing an order.<h3>Distribute items efficiently among stores</h3>Apportionment among stores is an important instrument for retailers to solve inventory excess and out-of-stock issues, especially in times of demand imbalance.Doing this based on the inventory ranges of each DC or store, with their respective consumption rhythms, is the ideal scenario, as it makes sure everyone is covered with the ideal minimum level to operate.It is essential to have an effective and agile control of the inventories of the DCs and stores to identify where there is a shortage or low levels and where there is excess inventory. Distribute your total stock properly and avoid problems in your network.<h3>Plan demand with an eye on consumption</h3>The demand planning process is crucial for retailers to be well prepared to serve consumers. A process more accurate and closer to reality ensures greater customer satisfaction.Using statistical forecasting is largely a great solution, as this method uses algorithms to combine several variables and reach a suggested demand level.But there is also the <a style="color: rgb(34, 42, 53);" rel="noopener noreferrer" href="https://www.neogrid.com/en/blog/demand-driven-supply-chain-and-how-it-works">concept of actual consumption</a>, where the retailer works with purchase and distribution as inventories decrease, reducing dependence on forecasting, which we consider one of the ideal scenarios.<h3>Prepare properly for events that interfere with demand</h3>Here we are talking about seasonal periods, those that cause peaks in demand and significantly affect planning. We believe that taking data from past events and, based on them, planning replenishment is the ideal scenario, as retailers can observe fluctuations and be better prepared.Replenishing only on the date I need something is risky, as there is a high chance of compromising cash due to situations that were not evaluated.Imagine that your company makes a large purchase of stock based only on what happened the previous year, but the item purchased ends up losing market share due to the entry of competitors, for example. You will have a big problem on your hands.<h3>Supply new products assertively</h3>Preparing stock for new products is a major challenge for retailers, after all, there is no exact parameter on which to base a decision. The ideal scenario, in this case, is to consider items of the same category in order to have a closer idea of consumption behavior. Doing it by guesswork is a huge risk.If you are going to start selling a new brand of laundry detergent, for example, analyze other brands of that item, looking at the profile of each product. Thus, it will be possible to have a parameter closer to the real one to make the purchase.<h3>Diagnosis of your operation</h3>Do you want to know how each of these items are in your operation? We have developed a diagnosis that will help you identify the maturity of your distribution and replenishment planning process.<a style="color: rgb(34, 42, 53);" rel="noopener noreferrer" href="https://neogrid.typeform.com/to/HB9bZfYi?typeform-source=admin.typeform.com">Planning Maturity Diagnosis (DRP)</a>

In the daily struggle to increase sales and achieve greater profitability, one of the biggest challenges for retailers is to balance the internal chain. Who wouldn't want to ensure better availability and have higher turnover, while reducing inventory levels? Every company wants that.However, to reach this level, there are practices, processes and indicators that must be aligned and in accordance with best market practices. The way the retailer supplies the network, for example, has a direct impact on the inventory balance at distribution centers and stores<h2>7 best practices in the distribution and replenishment planning process</h2>We have listed 7 best practices in this post, and we want to share them with you to help you achieve the best results. Check them out!<h3>Guarantee low out-of-stock levels</h3>Here the rule is simple and straightforward. Less out-of-stock on the shelves is better. A retailer sells 10 brands of 500 ml bottled water and one of these brands is out of stock, therefore, the out-of-stock indicator of that product is 10%.In this logic, levels of up to 10% are considered reasonable, but they need to be constantly addressed so that they are reduced as much as possible. If your company has levels higher than 10% and even 20%, it is necessary to raise a red flag.<h3>Ensure low excess inventory levels</h3>For excess inventory, the same rule that we mentioned for out-of-stocks applies: less idle products is better. Levels above 10% and 20% mean that your company has a very high volume of fixed capital in its inventory, which harms cash flow, working capital and even investments, not to mention problems related to product assortment and mix.So, a mantra for your operation is to ensure safe levels of excess inventory. Of course, ideally, you wouldn't have any, but we know how difficult this is to achieve.<h3>Have a proper process for replenishing the network</h3>Distributing and redistributing inventory among distribution centers and stores are essential practices for retailers to be more sustainable. Often, what is missing in one POS is in excess in another.So, you should always look at inventory levels and balance these levels before committing capital to new batches. If you don't, you could end up suffering from excess and out-of-stock.If one of your stores has high demand for a product and that item is close to out-of-stock, look at the inventory level at other stores and DCs before placing an order.<h3>Distribute items efficiently among stores</h3>Apportionment among stores is an important instrument for retailers to solve inventory excess and out-of-stock issues, especially in times of demand imbalance.Doing this based on the inventory ranges of each DC or store, with their respective consumption rhythms, is the ideal scenario, as it makes sure everyone is covered with the ideal minimum level to operate.It is essential to have an effective and agile control of the inventories of the DCs and stores to identify where there is a shortage or low levels and where there is excess inventory. Distribute your total stock properly and avoid problems in your network.<h3>Plan demand with an eye on consumption</h3>The demand planning process is crucial for retailers to be well prepared to serve consumers. A process more accurate and closer to reality ensures greater customer satisfaction.Using statistical forecasting is largely a great solution, as this method uses algorithms to combine several variables and reach a suggested demand level.But there is also the <a style="color: rgb(34, 42, 53);" target="_blank" rel="noopener noreferrer" href="https://www.neogrid.com/en/blog/demand-driven-supply-chain-and-how-it-works">concept of actual consumption</a>, where the retailer works with purchase and distribution as inventories decrease, reducing dependence on forecasting, which we consider one of the ideal scenarios.<h3>Prepare properly for events that interfere with demand</h3>Here we are talking about seasonal periods, those that cause peaks in demand and significantly affect planning. We believe that taking data from past events and, based on them, planning replenishment is the ideal scenario, as retailers can observe fluctuations and be better prepared.Replenishing only on the date I need something is risky, as there is a high chance of compromising cash due to situations that were not evaluated.Imagine that your company makes a large purchase of stock based only on what happened the previous year, but the item purchased ends up losing market share due to the entry of competitors, for example. You will have a big problem on your hands.<h3>Supply new products assertively</h3>Preparing stock for new products is a major challenge for retailers, after all, there is no exact parameter on which to base a decision. The ideal scenario, in this case, is to consider items of the same category in order to have a closer idea of consumption behavior. Doing it by guesswork is a huge risk.If you are going to start selling a new brand of laundry detergent, for example, analyze other brands of that item, looking at the profile of each product. Thus, it will be possible to have a parameter closer to the real one to make the purchase.<h3>Diagnosis of your operation</h3>Do you want to know how each of these items are in your operation? We have developed a diagnosis that will help you identify the maturity of your distribution and replenishment planning process.<a style="color: rgb(34, 42, 53);" target="_blank" rel="noopener noreferrer" href="https://neogrid.typeform.com/to/HB9bZfYi?typeform-source=admin.typeform.com">Planning Maturity Diagnosis (DRP)</a>

Checklist for the distribution and replenishment planning process

Understand the current status of your distribution and replenishment planning operation. Check out our checklist!

Do you want to learn more?

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Demand forecasting: what it is and its role in the supply chain

Accurately Measure Supply Chain Indicators With The Right Technology

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