Replenishment Business Process | Standard Retail Outbound Needs | Approach to D365 for Commerce with Adv WH Mgmt

Hi Guys, Hope you have read my previous post where we talked about the Wave planning for Brick-and-mortar Store orders for the Outbound side of the Retail Warehouse. We also looked at how the Store order looks like and different types of Store orders and what happens when it reaches the delivery store. In this blog, we are going to discuss the Replenishment business process involved to fulfil the order and the types of Replenishment process.

Replenishment in a Retail Warehouse have two kinds.

• Min / Max replenishment
• Demand-based wave or Wave replenishment that gets triggered when a wave is dropped of e-commerce orders.

To understand what these really mean and how they are executed, let’s go down onto the floor and take a look. The picking area inside of the Retail Warehouse is just like the front of the store. This is where the orders get picked. Each one of the locations has one SKU in it or product, and that product sits here all the time. It’s fixed to this pick location. That’s why they call it fixed pick location.

Min / Max Replenishment

Every day units are getting picked out in this pick phase, and eventually all the units will be picked out and will need to be restocked. Just like you see in a retail store, product will have to be brought out of the back and put onto the shelves. Well, the same thing happens in the picking area of a Retail Warehouse. This is called min/max replenishment and this is how it works.

At night the system will look at the inventory that’s in this pick phase. So if it doesn’t fall below that threshold, you get no replenishment. Let us go back to the reserve area and see the process of pulling replenishment cases.

Reserve or Bulk area is where the extra stock of all the products that are sold by a Retail Warehouse are stored. It’s like the backroom of the warehouse. The above picture shows the replenishment process. What you see the operator doing here is pulling cases out and he’s putting them onto a pallet that will be taken up to the forward pick area and put away. There are two primary requirements associated with replenishment.

• The first one is you have to give him an intelligent path through the reserve area so that it minimizes the travel that he’s going to follow. He shouldn’t have to revisit the same aisle four or five times. He needs to go down it one time.
• The second thing that’s important to point out and the second requirement for replenishment is that he doesn’t need to be the person that also puts them away into the actual forward pick location. It should be possible for him to pull them and somebody else to put them away. And this makes a lot of sense once you realize that you want to keep this vehicle which costs $35,000 to $40,000 working all the time. Also, this operator is an expensive guy relative to people that put product away. So you want to keep him busy on that vehicle, because he’s trained to use it, as opposed to working inside the forward pick area and putting things away there where you can do that type of work with people that are less expensive.

Demand / Wave Based Replenishment

The other form of replenishment known as demand-based or wave-based replenishment is more unique.

And to explain what it is, let us take a example of a newspaper advertisement which is in New York and it’s very famous. It has a lot of subscribers that are very wealthy, so suppose there is a French company that has put this ad and somebody in the Paris office has decided how are we going to drive our sales up of these expensive doggy beds. Well, we can put an ad on the homepage of this very famous New York paper, and as a result of that we will get lots of sales because there’s lots of well-to-do people in New York that can afford our doggy beds.

That makes a lot of sense from a marketing perspective, but what that probably meant to the people that are in the warehouse. For them the typical sales of these doggy beds are eight per day, and then all of a sudden the ad goes out onto this particular Website and the demand for that doggy bed spikes to 73. They’re running around like crazy trying to fill all these orders because they’ve got to finish off so many orders that they’ve got for this doggy beds from New York. I mean, it’s just crazy how demand has suddenly spiked. If you run an e-commerce business, you have to deal with these kinds of spikes all the time. And it’s simply tied back to the way in which product now can be marketed very specifically and very quickly. And that can change the demand for an item overnight or even in a few hours; that can make something that just normal into incredibly popular. So due to these Internet-based orders, you have to have some technology to help the Retail Warehouse person to deal with these spikes. And that is called demand-based replenishment.

Dynamic Forward Pick Locations

For wave-based replenishment or demand-based replenishment, to rightly execute, requires another concept that we call a dynamic forward pick location. So far you may have thought that picking area consisted of locations that were all basically the same, each location was fixed and tied to a particular item. In reality most Retail Warehouses don’t want that. They want to have a few locations that are dynamic; that, in other words, they’re not tied to a specific SKU or product, they change from day to day.

And the reason they want this is because of these spikes that you see. The way that wave-based replenishment works is on these days where there’s a spike, when that added quantity is needed will not necessarily come through the fixed pick location, instead, what they’d like to have is the normal demand comes through the fixed pick location, but when you have these weird, unpredictable spikes, they want that demand to be serviced through a series of dynamic forward pick locations. So when you run the wave, the system says I need so many of these doggy beds, and there’s not nearly enough in the fixed pick location, instead I’m going to bring up five or six cases and put them into locations in this dynamic forward pick area. So it’s the combination of wave-based replenishment mixed with dynamic forward pick locations that allow e-commerce warehouses to deal with these spikes in a very simplistic way. It’s crazy if you don’t have this functionality, as the guys would tell you that have suffered through it. But if you’ve got it, it makes it much easier.

So in D365 FO, if you’ve got the product in a dynamic pick location, you’ll configure the location directives and the rules for picking in such a way that your first choice is always be dynamic pick and clean those out so they’re available for future spikes before you pick it out of, say, the fixed pick.

What is Demand or Wave Based Replenishment?

This whole wave-based replenishment and dynamic forward pick location concept is a little fuzzy. So let us step through a couple of scenarios to help make it clearer.

Imagine that we have a SKU A, that has a fixed pick location that can hold a maximum of 25 units. Let’s think about our first scenario where we have demand for whatever reason on this particular day of 52.

And so how are we going to fill those. Because we’ve got 25 units, say, in the fixed pick location, and we don’t have any right now in any of the dynamic locations, so what is the system going to do. Well, it’s going to generate a replenishment for 27 that will be brought from the reserved area and dropped into one of those dynamic forward pick locations. Or in this case it probably will use two or put maybe 25 in the first one and two in the second one. So end up having 25 in the fixed and then we’ll have 25 plus two, say, in two dynamic locations. So that’s generally how it works.

In Scenario 2, let’s say we have a demand for 48 and we have 25 in the fixed pick location, and we also have 25 left over from a previous wave. Well, in that case, we’re not going to get any replenishments. There’s no need for any wave-based replenishments because we have plenty.

In the third scenario, somehow we’ve got demand for 34. But we don’t have anything in the fixed as well as dynamic Let’s say we just picked it clean last night and we forgot to run the min/max replenishment. When this happens, we’re going to pull 34. And usually it will dump straight into the dynamic locations as opposed to splitting it up and sending part of it to the fixed and part of it to dynamic, because you want to get it done quickly, so you want to minimize the number of tasks, the putaway tasks that get executed. So most retailers will say just dump it into dynamic and I’ll pick it clean and then run min/max the next morning or at night to fill the fixed pick location for SKU A to get it ready for the next day’s business.

So hopefully those three scenarios make it a little bit clearer what’s going on when we talk about wave-based replenishment and dynamic forward pick locations.

Replenishing to Full License Plate Quantity

We need to talk about one more requirement for replenishment, and that’s the ability to round up to a full license plate quantity. In retail you just can’t count on consistent case quantities. Sometimes a product may come in nine to a box; another time it may come in 15 to a box. And this has a significant impact on how replenishment needs to work. Because if you’re the replenishment operator and you need to go get, say, nine units to fulfill the wave demand and for a dynamic forward pick location, and all you have is, say, a box of 12, then you don’t want to send the operator to this location and tell him to open this box up and pull nine units out.

That is really inefficient and expensive. Instead, you just want the system to round up to the full license plate quantity. This logic has a little bit more nuances to it, for example, we need 21 but we have a box of 12, 9 and 24. Well, I don’t want it to go tell me to go get the box of 24 and round up unnecessarily. I want it to go tell me to get the box of nine and box of 12. So there’s some nuances in this round up to license plate functionality that a retailer is going to need, and you need to be able to and be prepared to talk about how D365 FO will provide it.

So I hope you got a better understanding from a requirements perspective about Replenishment process and different types of Replenishment, that’s what you should expect a Retail Warehouse manager to be asking about.

In the next blog, we’re going to look at the most important process in the Outbound side of the Retail Warehouse and that is Picking.

Feel free to reach out for any clarifications. If you like my blog posts then comment and subscribe to the blogs.

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