Against a backdrop of increasing economic pressure inventory management has become a central component of the supply chain.
Whether you’re a distributor, manufacturer or e-tailer, good inventory management helps you cut costs, avoid stock-outs, optimize warehousing and meet delivery deadlines. on time. Adopt the right procurement methods is essential.
In this article, we take a look at the different methods of stock management.
Inventory management using the replenishment method
The replenishment method is based on the idea of fixed quantity ordered at regular intervals. Ideal for products with stable consumption.
The company defines a threshold and stock quantity threshold. A command is automatically generated as soon as this threshold is reached.
The control point management method
Point-of-order is one of the most widely used methods of inventory management. It’s based on a simple but effective principle: automatically trigger an order as soon as stock levels reach a predefined critical threshold.
This threshold is not set at random: it is calculated on the basis of two key factors. Firstly, average consumption during lead time, i.e. the time elapsing between order and receipt. Secondly, a safety stock, designed to cover unforeseen events such as peak demand or supplier delays.
This method offers several advantages: it enables us to react quickly to fluctuations in demand, avoids stock-outs, and limits overstocking by avoiding excessive orders. It is particularly well suited to products with regular rotation, for which consumption is relatively predictable.
However, to be effective, the order point requires rigorous monitoring of stock levels and good data reliability. This is why many companies rely on software solutions such as XFR, which integrate this method into a predictive approach, automating order triggers while taking into account variations in demand and logistical constraints.
The replenishment method: maximum threshold replenishment
The replenishment method, also known as the maximum stock method, is based on a simple principle: replenish stocks (in warehouses or at points of sale) up to a predefined level, known as maximum stock. At each replenishment cycle, only the quantity needed to return to this target level is ordered.
The advantage of this approach is that it simplifies order management, avoiding complex calculations for each order. It enables us to maintain a relatively stable average stock level, while reducing the risk of stock-outs or overstocking.
The replenishment method is particularly suited to environments where supplies are regular (e.g. a weekly delivery round), or where you want to limit the costs associated with administrative order processing.
However, to be truly effective, it requires a clear definition of the maximum stock level, taking into account consumption, lead time and any safety stock. It is often coupled with forecasting or automated monitoring tools, which facilitate decision-making by proposing recommendations that take account of actual demand, logistical constraints and service objectives.
The make-to-order replenishment method: minimum stock for slow-moving products
The order-based replenishment method consists of launching replenishment only when a customer order is actually placed. It is particularly suitable for high-value or slow-moving finished products, for which it is preferable to avoid building up a large stock.
Unlike the Just-in-Time method, which aims to synchronize the entire logistics and production chain to deliver exactly when requirements arise, the On-Order method focuses solely on replenishing products according to customer orders, without seeking to optimize the entire value chain.
This approach reduces the capital tied up in inventory, but requires a responsive logistics organization and controlled supplier lead times to respond rapidly to requests.
The just-in-time method
Just-in-time (JIT) is a management method derived from Japanese lean management, which involves producing or delivering only the quantity needed, at the exact moment it is required. The aim of this strategy is to reduce stock levels as much as possible, in order to cut storage costs and avoid wastage.
To operate effectively, JIT relies on several key conditions:
Close coordination with suppliers to ensure frequent, reliable deliveries.
Rigorous inventory management with precise, up-to-date data in real time.
Full traceability of flows to track movements and anticipate needs.
Standardized processes to minimize errors and facilitate responsiveness.
By applying JIT, companies improve their flexibility, reduce the risk of overstocking or shortages, and optimize their cash flow. However, this method requires a mature and agile supply chain, as any disruption or delay can have an immediate impact on production or distribution.
The ABC method
The ABC method is an inventory management tool that classifies items into three categories according to their relative value in the overall inventory.
Class A items represent a small proportion in number, but have a high economic value: they therefore require rigorous management, frequent monitoring and precise control to avoid shortages or overstocking.
Items in class B are of importance, both in terms of value and volume, and are subject to regular but less frequent review.
Lastly, although class C items account for the majority in number, they represent a small proportion of stock value. They are therefore often managed in a simplified way, or even ordered on an as-needed basis, to optimize costs and limit management efforts. This segmentation enables companies to concentrate their resources on those elements most critical to their profitability.
- A high value items → fine management, inventory control rigorous.
- B : medium importance → regular revisions.
- C low value → simplified management, often on an “as ordered” basis.
Pull management
Pull flow is based on a simple principle: production or supply is triggered solely by actual demand. No product is manufactured or placed in stock without a customer order. This mode of operation aligns logistics flows with actual market needs, reducing unnecessary inventories, storage costs and the risk of obsolescence.
Pull flow is particularly well suited to agile companies or those operating in unstable environments, where demand is variable or difficult to forecast. It favors more flexible and responsive management, provided you have a responsive supply chain and tools capable of processing data in real time.
Push management
Push flow is based on a logic of anticipation: supplies and production are planned upstream, on the basis of demand forecasts. The company places its supplier orders in advance, then allocates stocks according to a pre-established distribution strategy (warehouses, stores, etc.).
This model is particularly well-suited to sales campaigns, highly seasonal products, or finished goods with regular turnover, for which demand is predictable. It ensures immediate availability of items, but entails a risk of overstocking or unsold stock in the event of discrepancies between forecasts and market reality.
Digitalize your inventory management with XFR for greater precision and responsiveness
Regardless of the method chosen: point-of-order, replenishment, JIT or pull flow, their effectiveness depends on a high-performance inventory management solution capable of centralizing data, analyzing flows and automating decisions. This is the logic behind XFR (Optimix Forecasting and Replenishment), a solution distinguished by its precision and adaptability.
Unlike traditional approaches, XFR integrates intelligent algorithms that anticipate needs based on actual demand, sales data and company-specific logistical constraints. The result: dynamic, real-time, continuously optimized inventory management, with automated recommendations to avoid both out-of-stock situations and overstocking.
Particularly well-suited to multi-channel, high-variability environments, this approach transforms inventory management into a strategic, reliable and sustainable lever.
The risks of poor management
Poor inventory management can have serious consequences for a company, both financially and operationally. Repeated stock-outs undermine customer satisfaction and lead to lost sales, while overstocking unnecessarily ties up capital, increases storage costs and the risk of obsolescence. Added to this are forecasting difficulties, lower team productivity and more complex decision-making due to the lack of reliable data.
Ineffective inventory management undermines the entire supply chain and compromises a company’s competitiveness.
Inventory management is a strategic link in the supply chain, directly linked to operational performance, profitability and customer satisfaction. Each method – whether point-of-order, replenishment-to-order, just-in-time, pull or push – offers specific advantages, depending on the context, the type of product and the company’s objectives.
However, whatever the method adopted, its effectiveness depends heavily on the quality of the data and the ability to manage flows in real time. This is why the support of high-performance inventory management software, such as XFR, becomes a real optimization lever. By combining forecasting, automation and agility, it transforms inventory management into a strategic steering tool, adapted to the demands of a constantly evolving market.
