Campbell Soup’s Continuous Replenishment Program: Evaluation and Enhanced Inventory Decision Rules¤

Campbell Soup’s Continuous Replenishment (CR) program is a novel innovation designed to improve the e¢ciency of inventory management throughout the supply chain. With CR: (1) retailers pay a constant wholesale price but continue to participate in consumer promotions; (2) retailers transmit to the supplier daily inventory information, via Electronic Data Interchange (EDI); and (3) the supplier assumes responsibility for managing retailer inventories, i.e. vendor managed inventories (VMI). We develop simple inventory management rules to operate CR, and we test these rules with a simulation using actual demand data provided by Campbell Soup. On this sample we ...nd that retailer inventories were reduced on average by 66% while maintaining or increasing average ...ll rates. This improvement reduces a retailer’s cost of goods sold by approximately 1:2%; which is signi...cant in the low pro...t margin grocery industry. Furthermore, these savings could have been achieved without VMI.