Replenishment Optimization (refilling or ordergeneration) is an important component to fully optimize inventory levels.
Replenishment optimization combines the results of forecasting and inventory optimization to create replenishment proposals. These proposals are created for all different levels of distribution and in the form of purchasing- or manufacturing orders on stock keeping unit level. Variables taken into account in replenishment optimization include lead time, variation in lead time, supply constraints, and batch sizes for both production and transportation. Despite variation in lead time and demand, there is an interval where replenishment proposals can vary and still meet the overall service level objective. This method is called “tunneling” and provides a high degree of flexibility.
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