Hub & Spoke Replenishment:
A more accurate approach
Commonly referred to as “transfer replenishment,” “central warehouse,” or “distribution center replenishment,” hub & spoke replenishment offers another strategy for managing your inventory across multiple warehouses. It involves designating a hub distribution center that receives and consolidates products and then sends them directly to other warehouse destinations.
Many systems use hub & spoke replenishment processes, but most of them don’t handle making the purchase and transfer suggestions for a complete hub & spoke set up. Typically, they have a hub and three or four spokes, and they will do a good job of buying what you need at the top, but they neglect to do a good job in terms of letting you know how much stock you need to transfer down to the spokes, and when to transfer it.
Some demand planning systems develop forecasts at each of the warehouse locations and add them together to get to the top warehouse location (the hub), and declare that is the total forecast.
At Absolute Value we do it differently. We roll up the history, and create a forecast at the company level, where a more accurate and statistically valid forecast can be made by considering the rolled-up usage. This technique enables you to take advantage of vendor minimums at the hub level, no longer forcing them at each spoke warehouse location.
We can also allow you to make any warehouse the hub for any item. The same warehouse does not need to be the hub for all product purchases.
If you have experience with small or remote warehouses, you know they don’t necessarily have consistent usage. To achieve more consistency and accuracy, Absolute Value’s Demand Planning system takes a unique approach to hub & spoke replenishment. Rather than rolling up the forecast from the spoke locations, the system rolls the usage history up through the replenishment path for purchasing or manufacturing at the top level.
The system creates a forecast at each level, but it relies on the forecast at the top for buying or manufacturing planning.