Quick Summary: The Replenishment Cycle (RC) determines order frequency and quantity independent of Lead Time. Lead Time represents the time in calendar days between ordering and receiving stock.
For necessary background, please preread Mastering Replenishment Cycle before proceeding with this article.
The Key Difference: “How Much” vs. “When”
It is essential to understand that the Replenishment Cycle and Lead Time are independent settings that control two different parts of the ordering process.
Replenishment Cycle (RC) determines how much to order. It is the number of days’ worth of inventory you wish to buy at one time.
Lead Time (LT) determines when to order. It is the time, in days, between placing an order and that item being available to use or sell. Typically dictated by manufacturing and transportation timelines.
The “RC = LT” Misconception
A common mistake is to assume the Replenishment Cycle must equal the Lead Time. This belief—e.g., “90-day LT means order 90 days of stock”—is incorrect and often counterproductive.
Example: Your warehouse can store only 30 days of stock for an item, but the item has a 90-day lead time. If you set RC = LT, you would order 90 days of stock with nowhere to store 60 days’ worth.
Correctly Using RC and LT Together
Set a realistic RC based on business needs (warehouse space, cash flow, order-processing capacity), independent of LT.
You may place multiple orders within a single lead time, so each shipment arrives as needed. For example, with LT = 90 days and RC = 30 days, you place staggered 30-day orders that fit your warehouse, each arriving as the prior supply runs low.
Visualizing Replenishment Cycle vs Lead Time
Click here for a deep dive into this topic
Click here for a deep dive into this topic
❌ Example 0: The Misconception
Replenishment Cycle = Lead Time (90 days)
This is a common mistake. Setting your RC to match your Lead Time can lead to massive overstocking, especially if your warehouse has limited space.
✅ Example 1: A Better Approach
Lead Time = 90 days
Replenishment Cycle = 30 days
Instead of ordering one massive 90-day batch, this method breaks it into three smaller 30-day orders spaced out. You:
Keep inventory flowing
Avoid bloated stock
Match orders to space and cash flow constraints
✅ Example 2: Mid-Cycle Order Placement
Lead Time = 90 days
Replenishment Cycle = 35 days
The order doesn't have to be placed the day a previous one arrives; it can be placed mid-cycle, optimizing your stock levels.
⚠️ Watchouts
Avoid RC = LT by Default: Setting the replenishment cycle equal to lead time can tie up unnecessary working capital and create warehouse capacity problems.
💡 Tips
Set RC for “How Much”: Choose your RC based on how much stock you want to hold, factoring in order frequency, administrative costs, and available space.
Let LT Govern “When”: Set the planning lead time to determine when to order so replenishments arrive just in time.
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