Warehouse Management and WMS: Restock Strategy

"Should out-of-stock items be replenished one by one or should multiple items be taken at once for replenishment?”

“How should the path of replenishment to achieve efficient replenishment? “

These are warehousing managers in the business frequently thinking about those problems. driven by these thoughts, the current WMS system can support the supply chain in different business field in a more pertinent way.

How Restock begins:

The application of separate storage and picking Mode has largely improved the space efficiency and picking efficiency. In this mode, the commodity should be moved from storage area to picking area by the warehouse staff, there’s how restock happened.

What is Restock Strategy

In written meaning, restocking means moving the lacked commodity from storage area to picking area. it is not hard to predict the possibility that consumer waits for too long in as to miss an opportunity to transaction.

In the same sense, during the pickup process, if only notify to sort when finding the stock-outs, will it affect the efficiency. if we set a mission to restock for the commodity closing to stock-outs, then the decreased efficiency caused by stock-outs will be improved?

For sure, this method will improve the efficiency. we can see how restock strategy be put into practice.

Restock strategy and WMS

If we could restock via inventory management software, what requisites should be taken care of? In the premise of “one commodity, one position”, if we’re about to set the restock mission, we should give thought to the following problem listed:

1.      How to define if a commodity is closing to stock-out?

General solution is manually set up an inventory alert value for each warehouse items. if the inventory of the stock item is lower than the set-up value, the restock mission will automatically be generated, Stock Item Inventory < Stock Inventory Alert Value.

To add, for the setting of alert value, you can refer the procurement business, regarding the "day" as a unit, set a coefficient, calculate average daily sales the inventory in a fixed time frame, the system dynamically set the inventory alert value of the warehouse.

Although this mode sounds very lofty, but in the actual business discussions, a considerable number of participants believe that this is an over-designed function, of course, we can’t deny this function, but we have not encountered the business mode highly catering to this mode.

2.      How to know how much goods need to be replenished?

 Through the "warehouse inventory alert value" we can know which item is about to out-of-stock, but the capacity of the warehouse is limited; for example, a packet of dried mangoes on the supermarket shelves are out of stock, but the replenishment staff from the warehouse dragged a whole tray, in the original position of the dried mangoes certainly can’t handle the volume , I am afraid that the replenishment staff have to return the superfluous goods back; in order to avoid this situation, we need to set the maximum capacity of the goods in the warehouse to determine the upper limit of the goods in a single replenishment.

Because there is different storage status for different commodities in the warehouse storage, for example, the small volume products may be sealed in a fixed box stored in the warehouse, moved along with the whole box. But large volume or commodity no suitable for resealing will be placed directly on the shelf.

In these cases, some goods are not suitable for replenishment by dismantling box, some goods are suitable for the whole tray to move, and some goods are suitable for piecemeal movement, so it’s vital to bear in mind those circumstances, when it comes to setting the capacity of the warehouse. for example, a product is suitable for replenishment of the whole box, the default maximum volume is 100 pieces in the carton specs, the early warning alert volume is 20 pieces, if the warehouse can accommodate even if it is very hardly to handle the volume, but it’s necessary to set the storage capacity to 120 or higher, so as to avoid the situation that the whole box replenishment will exceed the warehouse capacity.

In doing so, we conclude the restocking volume calculation formula: replenishment quantity = warehouse inventory capacity - warehouse inventory.

3. based on aforementioned two solution, rethink how to calculate the out-of-stock goods.

One who know WMS should know that before picking, the goods in the order will target the inventory location, after targeted, we will know where should we pick the goods and it will lock the stock of associated goods. Why it will lock the stock?

Because the inventory in the picking area is designated for the order of goods. In general, WMS inventory management software will record the inventory on the accounts, lock/occupied inventory (occupied or locked inventory is the required number of goods in the order of goods. once the occupied number is equal to the inventory on the account, the new order on goods will not be locked again to show the out-of-stock; for WMS specialized on e-commerce, some of them will add “inventory in the moving” based on if the goods in the order have been picked by warehouse staff), as well as available inventory, the formula is: Available inventory = Account inventory - occupied inventory.

From another perspective, if the goods in the order only lock inventory but not occupy inventory, then it will generate the consequence that the demand amount of goods in the order is higher than the actual inventory number, if you go to picking, you will find that there are no enough goods on the warehouse. In fact, in many systems that do not support the separation of storage and picking, this situation will happen, the system shows that the inventory is sufficient, but at the picking location, there is no inventory.

Then we need to think about the problem as the mentioned above: replenishment task generation = inventory at the location< inventory alert value, replenishment quantity = inventory capacity - inventory stock, in the WMS, because of the "occupied/locked inventory" and "available inventory", the system will not be able to replenish the stock. In WMS, because of "Occupied/Locked Inventory" and "Available Inventory", it can't just be simply interpreted as "inventory stock”.

It's important to determine the prerequisite to trigger the replenishment task: either regarding the available inventory as inventory in the location, when it is lower than alert value, or regarding the account inventory as inventory in the location, when it’s lower than alert value.  

The difference between the two assumption is:

 If taking the "available inventory" as "inventory in the location", it will incur the situation that inventory in the location is not picked, if make the replenishment at this moment, then the capacity shortage will occur; besides, if the multiple orders co-exist, it may generate the consequence that even no picking action after the order of goods distributes, but the continuous order will occupy the inventory in as to trigger the replenishment task which is highly unreasonable.

Therefore, it’s more plausible to regard “account inventory” as “inventory in the location”.

Implement of restocking- pickup/releasing

It’s easy to understand the pickup and releasing in the restocking process but in an integrated task, the picking and releasing route should be taken into account. If you're designing an aggregate replenishment task, then you'll also have to consider the container of the replenished items, because the order of the items taken out according to the pickup route doesn't necessarily remain the same when they're put out.

Efficiently implement this task requires flexible configuration of the pickup and release process, for example, after receiving the pickup task, system will bind transit containers, transit containers have a certain number of "storage locations". upon the pickup process, the picked goods need to be connected with the location at the transit container. after the pickup process, release the goods in according to the system assigned path.

Some reflections on actual operation

In the aforementioned sector, we talked about the restocking from the strategic spectrum. There are plenty of uncertainties in actual operations. Meanwhile what we do is to standardize design, reduce the logical flaws, let the user make the decision.

For example: Can we restock without task? Why can’t I restock by myself? If I restocked, will the replenishment task persist? What should be conduct if goods to be restocked retain high volume which is unsuitable for the pickup/release process?

It’s quite often to encounter those problems when it comes to real life experience. But data analysis will help in the warehouse storage management. For example, it’s not hard to verdict if the assigned size of location reasonable by analyzing a location restocked on a daily basis. In another instance, if a commodity in the location is frequently be restocked, it’s recommended to expand this location or transit the commodity to another location with higher capacity.