The average stock on hand is higher for a longer RC than a shorter RC (purple line). If you have stringent working capital (i.e. financial) targets, you will need to consider which items are necessary (or have the least negative financial impact) to keep long RCs. This also applies to very large items which may take up space in your warehouse, keeping a long RC’s worth of stock will not be feasible.

Since the shorter RC has a lower average stock on hand level than with a longer RC, it could probably accommodate a lesser time period to react to drops in demand i.e. if there is a lost customer, or if the item needs to be run down due to upcoming innovation, we can assume that this item will be able to be controlled quicker to prevent excess stock on hand than if it had a longer RC (where there is a higher average stock on hand level).

You will get close to stocking out much faster and more frequently with a shorter RC rather than a longer RC (red dots). This means the risk of this item stocking out will require more safety stock to be kept to mitigate this risk vs a longer RC.

The admin required for a short RC is more frequent than a long RC e.g. placing the order, off-loading a truck, quality control etc. (black dots). If you are importing cheaper items like straws, you would probably want to bring in a longer RC’s worth of stock rather than a shorter RC.

The longer your replenishment cycle, the lower your safety stock level needs to be. Refer to the image on the article The five factors that influence the calculation of Safety stock to view this relationship. This means having a shorter RC for an expensive item will need a higher safety stock level, which in turn impacts your working capital. In that case, a longer RC may be more feasible.