Supply Chain Management Software – Logility

How to excel at the Replenishment Shuffle

One of the most profitable moves a supply chain team can make is optimizing replenishment in a multi-tiered distribution network (manufacturer to DC, DC to Retailer, etc.). I have found many companies miss the boat with a single-echelon approach that simply replenishes the warehouse or the DC separately. This doesn’t optimize the multiple tiers inherent in a supply chain. To optimize replenishment it takes two to tango, just like Fred and Ginger. Fred may have some smooth moves by himself, but if he doesn’t account for the ways in which his steps will impact Ginger’s, we don’t exactly have Flying Down to Rio, do we?

In a multi-distribution-points replenishment dance, we have to consider:

• Size and ordering constraints
• Service level goals of each layer
• Lead times from suppliers and lead time variants
• Expediting policies
• Factoring individual DCs’ inventory positions into replenishment decisions
• Adapting to how larger orders from the regional DC to the supplier affect SKUs
• Allocating product down to the DC when faced with limited supply at the regional DCs

When an enterprise with multiple tiers of locations uses a true multi-echelon approach to manage inventory, the primary objective is to minimize the total inventory in all echelons while meeting service commitments to end customers. In other words, perform the replenishment shuffle with no wasted movement, even as the customer “audience” is bowled over by how easy you make it look.

But it’s not easy. As those who worked with Fred knew well, behind the scenes he instituted uncompromising standards for the entire production. A multi-echelon replenishment approach should synchronize order strategies, enable visibility up and down the supply chain, monitor and manage the bull-whip effect, avoid multiple independent forecast updates in each echelon, account for all lead times and variances, and correctly model the interactive effects of alternative replenishment strategies of one echelon on another.

Put the tools and processes in place to master those steps and soon you’ll be singin’ in the rain (with Gene Kelly, of course).