Continuous Replenishment Program

Optimizing Supply Chains with a Continuous Replenishment Program

The term Continuous Replenishment refers to the continuous supply of goods from a central warehouse or depot. The supplier usually takes over the flow of goods, whereby the actual trigger is to be found with the customer. In simple terms, the supplier supplies his customers with goods without an explicit individual order in Continuous Replenishment. The principle can be compared to newspaper delivery by subscription; the paper is delivered to the mailbox every evening without a separate order. This is always based on customer demand.
 
This demand is determined on the basis of the end customer's current stock level, which can be calculated using a Continuous Replenishment Program. Depending on the determined stock levels, the delivery quantity can fluctuate dynamically. If the warehouse is half full, only 50 percent of new goods are delivered. If, on the other hand, the warehouse is completely empty, the delivery quantity increases. In this way, replenishment is to be permanently guaranteed so that the recipient of the goods does not experience any bottlenecks. 

How does a CRP - Continuous Replenishment Program - work?

Various entities are involved in a supply chain. By the time a product reaches the sales floor, it has passed through various stages. A T-shirt is a simple example of the supply chain. It is manufactured in a factory, often located abroad. From there, it is passed on to the wholesaler via a distributor. The wholesaler in turn distributes it to retailers, and only from there does it reach the customer.

But who delivers when and how much?

A Continuous Replenishment Program is used to answer this question. It analyzes the average demand for the product in question and calculates an average value for when a new delivery must be made. This ensures that all stages of the supply chain always have sufficient goods in stock to supply the chain link behind them.

Where can a Continuous Replenishment Program be used?

The Continuous Replenishment Program can be used wherever there are supply chains. Every underlying station benefits from it, because bottlenecks can be avoided through consistent control of inventory levels. In retail, a bottleneck quickly becomes a problem.
 
If a customer wants to buy a certain product and can't find it, he may resort to an alternative or look for a new retailer. The retailer has no interest in losing his customer, but the manufacturer of the sold-out product does not want the end consumer to choose an alternative either. So the retailer and the manufacturer have the same goal, the product in demand must be available when the customer is looking for it.
 
If there is no communication between producer, wholesaler and retailer, bottlenecks often occur, which become a nuisance for the end customer and all other parties involved. With a Continuous Replenishment Program, such annoyances can be avoided because the following information is exchanged:

• Received order
• Inventory report from warehouse
• Sales data report
• Sales forecast for the coming period
• Report of a delivery
• Confirmation of goods receipt

The advantages and disadvantages of a Continuous Replenishment Program

Among the biggest advantages is facilitated communication, which can prevent a shortage of goods at all stages of the supply chain. Thanks to unified communication software, all parties in the supply chain are always kept up to date and can get the flow of goods up and running in a timely manner.
 
There are disadvantages in the application only when too much goods are delivered, because forecasts are not always valid and real. However, this problem is not attributable to the program, but to miscalculation, which can always happen in retail.

If you have any further questions on this subject, please do not hesitate to contact us. We look forward to hearing from you.