Learn about:
What is replenishment?
Why is replenishment important?
How to do root cause analysis for replenishment issues
How to pull out-of-stock reports in Walmart
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What is Replenishment?
In supply chain management, replenishment is the movement of inventory from the supplier to the vendor–usually a retailer–in an attempt to maintain appropriate stock levels.
This process usually involves the movement of product from the reserve storage in the supplier’s warehouse to the primary storage in the retailer’s distribution center and then onto the store itself.
Replenishment and Out-of-Stocks
Out-of-stocks occur often and create real problems for all involved parties in the supply chain: the supplier, the retailer, and the consumer. Loyal brand customers are not rewarded when their expectations are not met due to out-of-stocks, retailers lose sales when there are empty spaces on their shelves, and suppliers miss out on sales which could potentially have a negative impact on their relationship with both the retailer and the consumer.
Furthermore, suppliers may be losing sales and customers to category competitors. And retailers sometimes issue chargebacks if suppliers fail to meet their instock goals.
For example, Walmart has a corporate instock goal of 98.5%. This goal, in turn, puts a lot of pressure on suppliers to hit their retailer’s goal. Walmart has its own On Time and In Full (OTIF) standards for its suppliers that it has utilized in tandem with its own internal goal, requiring suppliers to ship 95% In Full.
Walmart has approximately 4,700 stores in the continental United States and over 150 distribution centers, some of which are about a million square feet. So, it can be tough to ensure all products are where they need to be.
What Causes Out-of-Stocks?
In the last few years, after the global pandemic, the constant rise and fall of new marketing trends, and the advent of new technologies that are constantly working to make supply chains more efficient, there has been an intensified interest in keeping shelves stocked. What’s more, flexibility has become a more important characteristic for suppliers as they try to keep a finger on the pulse of their customers in retailers.
Related Reading: A Guide to Walmart’s Luminate
Other factors may come into play as well. Inclement weather events, like an ice storm, could cause delays in shipping, which results in products not reaching the stores on time from the DC. An unexpected burst of sales at a particular location could cause an out-of-date replenishment plan to fail to meet demand.
The Replenishment Cycle
This process of restocking to maintain appropriate in-stock levels is often referred to as the replenishment cycle. Large retailers often have multiple replenishment channels, but some general principles can be abstracted:
The retailer’s replenishment system notices an out-of-stock instance at the store level.
The system aggregates out-of-stock quantities at the DC level.
A purchase order is written to the supplier, and it includes details like:
- Item
- Quantity needed
- Must arrive by date (MABD)
- DC destination
4. The supplier receives the order and ships it out to arrive on time and in full by the MABD.
5. The product arrives at the DC where it is parsed out onto trucks that deliver the appropriate quantities to individual stores.
6. Major retailers’ stores typically receive shipments of products every day, and shelves are often stocked at night.
7. In-store stock is purchased, and the cycle begins again.
Walmart accepts +/-20% of forecast sales, and they measure returns as a negative to your on-hand. Poor instocks may require a store-specific order (SSO) in order to focus replenishment around specific areas not dealt with by the organic replenishment cycle.
Thinking Like a Replenishment Analyst
There are vital questions to ask yourself to make sure your replenishment cycle is working efficiently and effectively:
Did we ship in full?
Did we ship on time? If not, were we early or late?
Did I outsell my forecast?
How do I prioritize which items to address?
For example, an item that is 90% instock in 4,000 stores vs. an item that is 90% instock in 400 stores
Is my instock trending up or down?
What does my pipe look like?
Instocks tend to drop at the end of the week and rise at the beginning. Sometimes suppliers hit their sales forecast but still experience issues with out-of-stocks. This could mean there are some stores overselling their forecast, while others are underselling theirs, canceling the item’s forecast variance out.
Related Reading: How Do I View My Walmart Instocks?
Forecast Adjustment Plans
A key component to best-in-class replenishment and keeping instocks is constant vigilance towards the demand plan. Whenever a change in sales trends is coming down the pipeline, recommending a forecast adjustment will go a long way to mitigating the risk of out-of-stocks. A Quartile Report will help to identify the top selling stores for a given product or item.
Replenishment Types and Processes in Retailers
Walking the line between under- and over-stocking involves many moving parts. Understanding replenishment processes and types helps to reduce unknowns and maximize profit margins for suppliers and retailers.
Replenishment Processes
Retailers will see a return on their investment when they have protocols determining when to reorder items from the supplier. Replenishment applies to all industries, from fashion and gardening to building materials and car parts. Companies only want to keep products in stock that consumers are looking for and want to purchase.
With an effective and efficient replacement process, retailers will have:
Increased levels of customer service
Higher inventory turnover and less stock sitting on shelves
Reduced costs in the reordering process and inventory waste
Retailers that have effective replenishment systems see monetary benefits. Whether it’s a large organization with an automated service or a small business with a team taking daily inventory, it is fiscally sound to know what to keep in stock and what to discontinue.
Having a dedicated system or team allows an organization to concentrate on other tasks that ensure a good supply chain. Staff or automated systems can prepare your team to communicate with the parties involved proactively for issues like late deliveries or temporarily out-of-stock items.
Businesses will also know when there might be an excess of seasonal products, so retailers can prepare to run sales ads before the items take up space on the shelves. Organizations can also prepare if items are OOS in time to warn their customers.
How to Create a Replenishment Process
Suppliers and retailers can implement automated or manual replenishment processes or outsource to a third party who specializes in those things. Manual inventory works for small and mid-sized businesses, but it’s not ideal for larger corporations. There’s too much inventory to track and reorder. In these cases, automatic systems work best.
Replenishment processes can be thought of as belonging to four broad categories, each with their own pros and cons for the business situation.
1. Reorder Point Process
Companies will need a robust IT system to monitor their inventory as an item sells. It is useful and ensures a product isn’t out-of-stock.
The process is simple. The supplier or retailer enters a maximum and a minimum number of items in stock into the system. When inventory levels fall below the minimum threshold, the system sends a message to reorder to the vendor.
There are various options available for dealing with a situation when the levels rise above the maximum threshold. In some instances, this could be a good indication that a rollback/discount should go into effect.
2. Periodic Process
In the case of the Periodic Process, instead of constantly monitoring inventory levels, the supplier manually performs the process every three months. If the items are in stock and there’s back inventory, no reordering is necessary. The company only orders the product when it’s low and during the periodic check.
Smaller retailers will see profit increases using the periodic process. It works for several industries, including fashion and gardening.
3. Seasonal Replenishment Process
Businesses that use this strategy are the ones with high-demand sales for a set period. During the busy season, there isn’t time for inventory. Instead, the company only does this during the down or slow time. It does leave a risk for items being OSS, but if the offseason reports are accurate and if the seasonality is predictable enough, then it should work well.
During the downtime, the retailers and/or suppliers check and restock inventory with the available product. Retailers can contact vendors to replenish the shelves. It is a good way to avoid overstock problems while still keeping most customers satisfied.
4. Demand Replenishment Process
Demand replenishment is a straightforward strategy that works well for many businesses. Suppliers only replenish stock based on consumer demand. If a product isn’t selling, the retailer doesn’t reorder it. Out-of-stocks are common with this process, but ideally, this is only a result of a dip in customer demand.
In the case of demand replenishment processes, inventory needs frequent checking. An automated system works best. These systems track inventory in real-time, so retailers and suppliers are in sync. Organizations also need to be ready to meet changing customer demands. Tracking popular items is critical, along with having back stock.
The process requires careful planning for the businesses involved to be successful. Creating a demand plan and a supply plan helps with this strategy.
Strategizing Replenishment for Supplier Success
Running out of a product one or two times doesn’t affect most businesses. Companies can expect OOS to occur with popular items. When a business is consistently out of an item, or several products, profit margins will begin to fall. The supplier and retailer will both lose out on sales, along with potential returning customers.
Replenishment is an integral part of any business. It ensures that products are on the shelves. However, replenishment also means companies only have what they need in stock, including overflow product.
Having a replenishment process designed to fit the company ensures that the retailer can stock its shelves for customers. It also helps to prevent over-ordering, especially seasonal items. Under-ordering is just as harmful to a business, and a replenishment strategy will prevent this.
Related Reading – QuickMods: Walmart’s New Shelving Initiative
The Root Cause of Replenishment Issues
Aside from anomalous events like inclement weather and other force majeure circumstances, a successful supply plan should always result in inventory availability at stores when the consumer plans to purchase.
But when things go wrong, being agile enough to pivot and do root cause analysis on out-of-stocks, low-in-stocks, and low-replenishment stocks is important for staying competitive.
The Out-of-Stock Root Cause Analysis Dashboard in Retail Link
Before the migration to Scintilla (previously called Luminate), out of stocks were analyzed in the Out-of-Stock Root Cause Analysis dashboard in Retail Link.
Before introducing this tool, Walmart had suppliers download and examine significant volumes of item-level and store-level data to determine the root cause of in-stock deficiencies. The Out-of-Stock—Root Cause Dashboard provided the supplier with guidance on the various factors that can cause in-stock defects. With this initial guidance, suppliers concentrated on the specific causes that they could control.
What Did the Out-of-Stock Root Cause Analysis Dashboard Show?
The reports showed the in-stock performance at the time the report was pulled and included a separate column for each of the root causes that made up the difference between the stock percentage and 100%, known as a waterfall chart.
Users could hover over any of the columns to further break down the root cause associated with that bucket. Clicking on any column displayed lower-level analyses illustrated on a graph. The definitions of all the buckets viewable in the waterfall were listed below.
Out of Stock – Root Cause Dashboard Results
Note: Not all columns listed below were visible. The waterfall chart only displayed columns that had data assigned to each bucket. Retail Link denoted the accountability for each bucket as either Walmart, Supplier, or Walmart/Supplier.
Instock – Indicated the instock performance for the filter selected. The difference between this number and 100% represented the total out-of-stock. Retail Link broke down the out-of-stock deficiencies in subsequent columns.
Modular – Indicated how much the out-of-stock was due to modular factors. Several factors impacted instock numbers. Examples of modular impacts included:
End of Life (Walmart) – The product transitioned off modulars. Since the item was dropping from the modular, Walmart eventually stopped buying the item. This transition led to instock deficiencies until the item formally left the modular.
Validity (Walmart/Supplier) – Item setup issues or replenishment settings impacted availability. Users verified that replenishment settings aligned with Walmart’s guidance and collaborated with their Replenishment Manager for any issues in this bucket.
DC DRP (Walmart) – A “do not replenish” flag at the DC level. DCs did not order items with this status. If this flag was unexpected, users collaborated with their Replenishment Manager for resolution or clarification.
Store DRP (Walmart) – A “do not replenish” flag at the store level. Similar to DC DRP, stores did not order items with this status. Unexpected flags required collaboration with the Replenishment Manager.
DC CWO-DC (Walmart) – The “Cancel When Out” indicator blocked flow from the DC to the store. Items in this status did not receive orders once the DCs were out of stock. Unexpected flags required collaboration with the Replenishment Manager.
CID Instock (Walmart/Supplier) – The product was out of stock, but another item in the CID was in stock. When one supplier could not fulfill orders, certain products replaced the out-of-stock item on shelves.
Prime Change (Walmart) – The prime product changed within the lead time. This occurred when there was more than one variation of an item, such as items fulfilled domestically part of the year and via direct import channels for the rest. If the prime item changed while orders were in transit, out-of-stock data was assigned to this bucket.
Low Store Count (Walmart/Supplier) – Less than a 15-store count was in the servicing DC. Low store count was a difficult root cause to troubleshoot. Since DCs could only order entire vendor packs, large pack sizes sometimes prevented low-volume DCs from ordering even when some stores needed the product. A potential solution was to change the vendor pack quantity, allowing DCs to order smaller amounts.
New DFU (Walmart) – A new item store became effective within lead time. If new stores became effective during the transit of open orders, temporary instock issues arose until the replenishment system placed orders for the new stores.
Recent Mod (Walmart) – The modular recently underwent a change. Although Walmart typically communicated this change to suppliers beforehand, unexpected changes sometimes occurred. For example, an expansion of modular linear feet that increased facings for a product could cause sharp instock declines until the replenishment system placed orders for the additional facings.
Forecast – Indicated how much out-of-stock was due to forecast factors.
Forecast (Walmart/Supplier) – Walmart or the supplier under-forecasted the item, an unexpected sales spike occurred, or there was insufficient safety stock. Users monitored sales forecasts weekly and communicated discrepancies or concerns with the Replenishment Manager for resolution.
Low SS (Walmart/Supplier) – Items sold more than forecasted due to sales of more than one unit for low-volume items with only one unit or fewer of safety stock. Large, bulky goods had less space for safety stock, which made this a difficult root cause to address.
Supplier – Indicated how much out-of-stock was due solely to supplier factors. Formal accountability for these reasons lay with the supplier.
In Full (Supplier) – Walmart did not receive the order in full based on the original order quantity for system-generated orders. Users aligned with the Corporate POS Forecast and Supply Plan weekly, resolving discrepancies with the Replenishment Manager.
On Time (Supplier) – Walmart did not receive the order on time according to the original MABD. Walmart relied on suppliers to deliver within the acceptable delivery window.
Return to DC (Supplier) – The product returned from the store to DC due to defect or damage. Users ensured they shipped cases in sufficient containers to prevent transit damage.
Recall (Supplier) – A recall was issued for the product.
Logistics – Indicated how much out-of-stock was due to Walmart supply chain factors. These issues were primarily in Walmart’s accountability bucket, though users worked with Replenishment Managers to resolve concerns.
Collect On Time (Walmart/Supplier) – Walmart’s supply chain delivered the order after the MABD. Incorrect lead times could also prevent inventory from arriving within the delivery window. Users conducted Lead Time Audits to ensure accuracy.
Import Collect On Time (Walmart/Supplier) – Walmart’s supply chain delivered the import order after the MABD. Suppliers were responsible for delivering direct import orders to the port.
Store Ops – Indicated how much out-of-stock was due to store operations factors.
OH Adjustments (Walmart) – A store associate or phantom inventory system created a negative adjustment. On-hand adjustments caused sudden drops in instock until the replenishment system placed new orders.
Store Markdowns (Walmart) – Store markdowns generated unexpected DC demand. Sudden markdowns caused higher-than-forecasted sales or sharp inventory decreases.
Manual Orders (Walmart) – Store manual orders exhausted DC inventory. Unforecasted events caused instock drops until the replenishment system placed new orders.
Some suppliers still have access to the Out-of-Stocks dashboard in Retail Link, but Walmart prefers for suppliers to use Scintilla (previously known as Luminate) for more accurate in-stocks reporting.
How to Pull Replenishment Data in Luminate/Scintilla
For more on pulling in-stock data from Luminate/Scintilla, see our article "How Do I View My Walmart Instocks?" In-stocks are very important for understanding replenishment needs. In this section, we’ll also cover how to pull Out-of-Stocks in Luminate/Scintilla.
Most Walmart buyers and suppliers prefer the Replenishment Instock % metric over the older Instock % metric. Replenishment Instock % is defined as the number of stores with at least one day’s worth of product on-hand, and Instock % is defined as the number of stores that have product on-hand.
Replenishment Instock % is therefore thought of as a more in-depth look into the same data at a store level, giving you better insight into which stores are selling at a higher rate than others.
How to Pull Out-of-Stocks in Luminate
To look for Out-of-Stocks in Luminate/Scintilla, you will need to use a number of different datasets that are available in Basic. Some levels of insight will not be available to Basic users because Charter offers some columns that are not available in Basic.
Out-of-Stocks in the DC Metrics Dataset
You can use the DC Metrics dataset in Report Builder to access the following data points/columns:
Out of Stock Case Quantity – Last Year
Out of Stock Case Quantity – This Year
Out of Stock Each Quantity – Last Year
Out of Stock Each Quantity – This Year
Staple Stock Order Warehouse Quantity in Units – Last Year
Staple Stock Order Warehouse Quantity in Units – This Year
Staple Stock Ship Warehouse Pack Quantity – Last Year
Staple Stock Ship Warehouse Pack Quantity – This Year
Staple Stock Ship Warehouse Quantity in Units – Last Year
Staple Stock Ship Warehouse Quantity in Units – This Year
Warehouse Packs Staple Stock on Order – Last Year
Warehouse Packs Staple Stock on Order – This Year
These columns will give you insight, particularly into replenishment data at the DC level.
Out-of-Stocks Using Other Datasets
Other datasets will give you insight into Estimated Out-of-Stock dates at different levels. These datasets are:
Modular Plan Metrics
Store Demand Forecast
Order Forecast
Depending on the level that you want to analyze (i.e. modular, store, or order), you can use these to get a sense of the timeline for particular items at these levels.
SupplyPike’s Software and SupplierWiki’s Resources
Get Insight with SupplyPike’s Software
Maintaining a healthy supply chain from start to finish is difficult in the retail world. SupplyPike’s software helps retail suppliers in many major retailers.
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Schedule a meeting with a team member to find out if SupplyPike is right for your retail business.
SupplierWiki’s Resources: Continued Learning
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