Replenishment Strategy

Generally, choosing a replenishment strategy depends on the level of uncertainty of demand and supply. When demand is constant over time and supply channels are reliable, the basic economic order quantity (EOQ) replenishment strategy is sufficient. EOQ is the most basic of all the replenishment strategies and is typically governed by both the inventory carrying charge and the fixed cost per replenishment.

One assumption of EOQ is that the entire order quantity is produced (or arrives) at the same time. If, however, the supply quantity is constrained by production rate, then you may choose to modify EOQ to account for the finite production or supply quantity. This replenishment strategy is known as the economic production quantity (EPQ).

There are more complex strategies that can be utilized to account for, say, uncertain demand or variable replenishment lead times. Every company’s stocking situation is different. We can help determine the best, most cost effective stocking levels and replenishment strategy for you and your company.