Too often we hear lay people, and even many managers, talking about warehouse replenishment and fulfillment as though they are synonymous. These two terms actually refer to different parts of the warehouse process. In order to manage each area of your warehouse effectively, you need to understand what they actually mean and what unique challenges they present.
Let’s take a look at both warehouse replenishment and fulfillment to get a better grasp of what each term means.
Fulfillment is what takes a product from the supplier to their customer. This includes, but is not limited to: receiving, processing, delivery, and returns of the product. Replenishment focuses on the quantity of inventory being restocked, whereas fulfillment deals with the processes involved in completing an order.
In a Warehouse all of the activities involved in sending initial orders to customers or channels are considered Fulfillment. Whether the order is sent to an end consumer, another company, a retail store, a manufacturing facility or another distribution Center, the process of sending product to that customer is Fulfillment. When you talk about fulfillment, you are really talking about how you are going to serve your customers from the moment they place an order with you. The smoother your fulfillment process runs, the happier your customers will be.
Warehouse replenishment is a much more limited term. Replenishment only refers to one of two things. The first is refilling your warehouses with products that you regularly order from external sources. This is a short process that usually only involves a few steps, and is focused on the relationship between you and your vendors, not your customers.
When you are discussing receiving more material from your suppliers you will send them an order to replenish your supply. If you need to move more material within your warehouse to different storage or processing locations so that they are positioned to fill orders, that is Replenishment. And if your customer or channel wants more product in addition to what you have already sent then that is also considered Replenishment.
With this understanding of what fulfillment and replenishment really mean, it is easy to see why they are not interchangeable. They actually deal with different relationships, although replenishment is a key element of fulfillment. In general, when you are discussing these processes, you will be looking at different sets of data. In replenishment, you are looking at internal numbers related to your inventory management while fulfillment is concerned with the time it takes to get orders out the door and the accuracy of those items.
Replenishment should occur when your products reach their reorder point. This is so that you can avoid stock shortages from occurring. In an inventory management system, it can calculate the reorder point based on the parameters you set for each item.
The Significance of the Distinction
Why is it important to label these two terms and make that distinction?
At a very crude level both involve the completion of orders in a Warehouse or Distribution Centre setting. In either case, you have to receive goods, store them, pick them, process them, pack them and then ship them.
If you are Fulfilling initial demand for goods, you are ordering goods based on forecasts or some level of demand planning. When you are Replenishing those goods you are engaging processes associated with Inventory management, re-order points, stocking levels, order lead times, transit times, purchase order changes and more.
In the case of Fulfillment, you are sending a customer the goods for the first time. If there is any problem with these goods, for instance due to quality issues, the customer may return those goods. If you are Fulfilling orders, you may be able to do that in full case quantities or full pallet quantities.
In the case of Replenishment, you may be satisfying orders requiring significant breakage of package sizes requiring the picking, packing and shipping of individual items in extreme cases.
The FLEX Logistics Team is Here to Help!
Fulfillment and Replenishment are terms used regularly in Supply Chain. They are not synonymous even though they can involve the usage of many of the same processes in their planning and execution.
The different sources and timing for demand creation and the different processes required to execute them are what make Fulfillment and Replenishment unique.
Our team understands the importance of getting your products to the market. That is why we aim to understand your business and build lasting relationships with you and your team. Whether you are looking to add a new warehouse to your existing operations, growing and need to increase your distribution efforts, or starting a new company, FLEX has the solutions to meet your supply chain needs.
Contact us today to discuss your current and future warehousing and logistics needs. We will work together with you to understand your requirements and develop a solution that will set you up for future success.