Automatic replenishment is a method of supplying materials or finished products based on the automated generation of supply orders. These supply orders are generated automatically by some computer system and can be manufacturing orders, distribution orders or orders to suppliers.

Automatic replenishment mainly consists of programming some system to trigger the supply based on a certain frequency and/or inventory condition. The objective is to maintain an available inventory that meets customer needs within the supply chain at a level of profitability set by the company.

In this way, some retail store chain can establish a desired level of inventory based on the target availability of merchandise to the customer (how many customers we want to find the merchandise they are looking for). These parameters must be integrated into the system so that it recognizes the moment in which a purchase order must be generated for each supplier and the quantity of each product needed in each of the stores. The objective is to reduce the stock out of merchandise in the store so that the customer finds the product that the retailer offers (increased sales).

Automatic replenishment has some advantages and disadvantages over a manual replenishment generated by some planner or specialized buyer:.

The most common indicator used to measure the effects and defects of automatic replenishment is "sold out" or "out of stock", which means the number of products that have reached a store inventory equal to zero or at a level irrelevant to generating customer satisfaction.

Reducing the shortage in the store, warehouse or production line has a cost, and that cost is the working capital that represents the supported inventory, therefore the challenge of this scheme is to balance the "out of stock" and the inventory to achieve customer satisfaction at an optimal cost. Each company defines the objectives of both sides of this balance.

There are computer systems specialized in this type of supply and that use one or more statistical methods. These methods may be aimed at setting a desired inventory level at any given time or they may be aimed at maintaining a targeted level that supports a sales forecast.

The most used factors to schedule an automatic refill are:.

A simple method of automatic replenishment is to set a target stock where the system will calculate the inventory necessary to maintain said stock. This method does not consider seasonal cyclicality of demand, so its use is limited.