Multifacility operations servicing multiple geographies are faced with the constant question of optimal warehouse supply levels, and re-order mechanisms. We are all familiar with the point-of-sale enabled inventory tracking we see in the supermarket. Often this is not the case with far-flung warehouses where inventory updates may not be compatible (systems unable to speak to each other without a manual or clunky bridge) or even real-time. How to tackle this? If the replenishment list can be generated automatically, then so much the better. Manual intervention should be minimized, or left to correct default values.
Ideally, according to LEAN and other guidelines, as one unit is relieved from stock, another is ordered to replenish to optimum levels. When a multiplicity of small items is involved, the replenishment process becomes very labor intensive, as each item is picked, catalogued, packed, and re-entered into stock at the destination, even using aids such as item bar-coding. Inventory levels can be controlled on a max/min system, where actual census can vary within a predetermined range before the re-order signal is given. This enables bulk picks, a much faster and efficient handling protocol. The bulk quantity can also be specified so as to take advantage of packing, shipping, and lot size parameters (ever order a 5-pack of beer?!). Consolidated regular shipments at predetermined intervals (eg. twice a week) may be preferable to daily shipments in some cases.
A simple reflexive system may not allow for irregular demand (end of quarter sales uptick, large individual orders and the like). Regulatory concerns may also come into play, as one-direction-only restocking creates scrap risk if inventory is expired or stranded in unusable locations.
Storage requirements are a key variable. Items requiring special handling and storage (low temperature, biohazard, dangerous goods) may be limited in the total space available at the receiving end, and stock should not exceed capacity, especially with multiple items on a max/min re-order.
If the re-order reaction and cycle time is short enough, then the destination warehouse can be minimally stocked, as re-supply is fast and easy – subject to how much stock turns over. Again, consider the calculus of efficiency of bulk handling vs multiple individual picks and the risk of stranding inventory. International shipments typically require longer times of weeks or more to ship cheaply and efficiently. Expedited shipping to meet unexpected customer needs can eat up profit in a hurry, especially if margins are thin. The shipping schedule may also be at the whim of customs and cold storage capacity options.
With proper analysis of order history and material lot size, an optimal solution for minimizing inventory, shipping cost and working capital while maximizing availability to the customer can easily be reached. Your particular solution will depend on the balance of these factors and your own business philosophy.