Types of Replenishment and When to Use Them

The word Replenishment covers many practical approaches to keeping inventory in place. Each replenishment type has strengths and trade-offs. For beginners, understanding the common types and when to use them helps you pick the simplest, most effective method for a SKU or a business area.

1. Reorder point (continuous review)

How it works: You monitor inventory continuously. When quantity reaches a predetermined reorder point, the system or planner places an order for a defined replenishment quantity.

Best for: Fast-moving items with relatively stable demand and known lead times.

Pros: Low risk of stockouts (if reorder points are accurate), straightforward to automate, good for SKUs with predictable consumption.

Cons: Requires reliable inventory visibility and accurate lead-time estimates; can be inefficient when demand is highly variable.

2. Periodic review (order-up-to)

How it works: Inventory is checked on a schedule (daily, weekly, monthly). At each review, you replenish up to a target level (order-up-to level).

Best for: Items with irregular demand or when continuous monitoring is costly. Often used for low-value or slow-moving SKUs.

Pros: Simpler to manage for many SKUs at once, easier for manual processes.

Cons: Higher risk of stockouts between reviews; requires larger safety stock to cover variability.

3. Min/Max

How it works: Keep inventory between a minimum and a maximum. When stock falls to the minimum, replenish up to the maximum.

Best for: Operations that want predictable order sizes and timing without continuous monitoring.

Pros: Easy to understand and implement; good for shelf replenishment within a warehouse.

Cons: Needs periodic adjustments as demand or lead times change.

4. Kanban / Pull replenishment

How it works: Replenishment is triggered by actual usage or empty containers/cards (classic in lean manufacturing and some warehouses). A physical or electronic signal moves stock from reserve to pick locations or prompts supplier delivery.

Best for: High-turnover items with stable consumption patterns and short lead times, or manufacturing lines where just-in-time supply is essential.

Pros: Reduces excess inventory, ties replenishment tightly to usage, supports lean operations.

Cons: Not suitable for highly variable demand or long/inconsistent supplier lead times.

5. Vendor-Managed Inventory (VMI) / Consignment

How it works: Suppliers monitor your inventory and decide when and how much to replenish, or they hold stock on consignment until you consume it.

Best for: Strategic supplier relationships, high-frequency SKUs, or when suppliers can better forecast demand.

Pros: Reduces buyer’s administrative burden and often improves fill rates; transfers some inventory risk to supplier.

Cons: Requires trust, data sharing, and good collaboration systems; supplier may prioritize their own logistics efficiency over your immediate needs.

6. Demand-driven automatic replenishment

How it works: Software integrates sales data, forecasts, lead times, and safety stock rules to automatically create replenishment orders. This can include machine-learning forecasts and multi-echelon optimization.

Best for: Complex operations with many SKUs, varying demand patterns, or when accuracy and scale matter.

Pros: Scales well, reduces manual errors, can lower inventory while preserving service levels.

Cons: Requires accurate data, system integration, and some expertise to tune models.

Choosing the right method

To select a replenishment type, consider:

• Demand variability: Stable demand favors reorder point or Kanban; variable demand may require periodic review with higher safety stock or advanced forecasting.
• Lead time: Longer or unpredictable lead times increase the value of forecasting and safety stock, making simple Kanban risky.
• Value and criticality: High-value or critical parts deserve tighter control and possibly continuous review; low-value items may fit periodic review.
• Operational capability: Do you have a WMS/TMS that supports automation? If not, simpler rules like min/max or periodic review might be more practical.

Practical examples

Example 1 — Grocery store: Fresh produce may use periodic review for daily restocking, while canned goods use reorder point because demand is steady. Example 2 — E-commerce: Fast-moving electronics use demand-driven automatic replenishment integrated with sales channels; slow-moving accessories use periodic review to limit ordering frequency.

Start small and iterate

For beginners, adopt a mix: use continuous review for top SKUs (A items), min/max for B items, and periodic review for C items. Monitor service levels and adjust thresholds. Over time, as data improves, consider migrating to automated, forecast-driven replenishment for more SKUs.

Conclusion



There’s no single best type of replenishment. The right choice depends on SKU attributes, supplier performance, and system capabilities. Understanding the options and aligning them with your business priorities will keep inventory lean and customers happy.