Inventory management might be one of the most important aspects of managing a warehouse. Ultimately, efficient inventory management translates to saved time and money. So, what does good inventory management look like? Check out our basic tips for better inventory management practices.
What is inventory management?
To properly manage inventory, we first need to understand what inventory management is. WallStreetMojo defined inventory management as follows: “Inventory management in business refers to managing order processing, manufacturing, storage, and selling raw materials and finished goods. It ensures the right type of goods reach the right place in the right quantity at the right time and at the right price.”
Some use the terms inventory management and warehouse management interchangeably. Despite their many similarities, there are significant differences between warehouse management and inventory management. To keep it short, inventory management focuses solely on the inventory in the warehouse and identifies the replenishment point, while warehouse management focuses more on the operation within the warehouse.
Why does inventory management matter?
Simply put, inventory management costs money. The better you manage inventory, the more money you are saving. Managing inventory well also means you are meeting customer demands and minimizing any lost sales due to poor stock management. Poor inventory management might look like this: you take orders when the warehouse is understocked or reject one not being aware there are enough items to fulfill the order.
In the latter case, overstock can also be the cause of damaged goods – meaning more money is lost. Moreover, you likely need to cover extra warehouse charges.
Best inventory management disciplines
If you wish to improve your inventory management processes but do not know where to start, take a look at the tips suggested below.
Empower your employees
A warehouse runs as efficiently as the people operating it. Therefore, spend time properly training your staff on the basic skills they need to do their jobs well.
Start by appointing a competent warehouse manager, someone who is detail-oriented and not afraid to learn new technologies. This person will overlook the operation of the entire warehouse, which of course, includes inventory management. He or she would be at the center of your inventory management activities – monitoring the general flow of stocks, assisting workers should any problems come up, and so on. A warehouse management system will be of great help to the manager as it automates most of the tasks, keeping accurate records and allowing the manager to focus on more important matters.
With an automation system, make sure all the staff participates in mandatory training to learn how to best utilize the technology for more productive work. Monitor their work to give your workers timely feedback to improve their efficiency. Make sure you get regular feedback from your team, too. It is usually those in the frontline that best understand the work and suggest great ideas for better consistency and accuracy.
All in all, by enabling your team and your warehouse manager, the inventory management processes are conducted much more efficiently while the troubleshooting is also increased significantly.
Optimize your warehouse layout
How long has it been since you reviewed your warehouse design? Do you sometimes find yourself stopping in track because you noticed the storage space has not been utilized as efficiently as you would want it to?
Arranging your warehouse efficiently is one of the most basic things to do. A warehouse design may differ depending on several factors (what is the size of your inventory? Are there any special requirements for storing them? Do they have a long or short shelf life? Which items have the fastest turnover rate? etc.). Nonetheless, you need to check to make sure your warehouse layout allows for the inventory processes to go on as smoothly as possible. This means:
- The aisles in the warehouse are well-lit and wide enough for both the equipment and your staff to move around comfortably, minimizing the risk of any accidents.
- Make sure the fast-selling items are easily accessible.
- The layout does not hinder the picking, packing, and shipping process.
- The warehouse space is well-utilized – both horizontally and vertically.
With that being said, a smart layout allows for smoother, more efficient operations within the warehouse. Make sure to review your warehouse layout frequently, especially when you experience a substantial rise in sales, or wish to integrate any particular logistics strategies.
Use labels and signs well
When talking about inventory management, precision and efficiency go hand in hand. Even with well-trained workers and a smart warehouse layout, the workflow will still be hindered significantly if the shelves and labels are confusing. Any confusion easily leads to delays, lost items, or even accidents.
That is why you should clearly label and sign everything. Regarding the facility in the warehouse, you should have clear signs indicating each area inside the warehouse: the receiving docks, aisle numbers, and so on for easy navigation. Then label the racks, shelves, routes, and equipment.
Regarding your inventory, determine how you want to label and track them. Efficient tracking is a crucial part of inventory management. There are several types of tracking:
- Serial tracking: a system allowing you to track individual units of products. This kind of tracking is often utilized in the automobile and electronics industry. It is suitable for items that have a high value but have a low sale quantity.
- Lot tracking: a system used to determine the goods’ location, value, and quantity. It is suitable for items that have a low value but have a high sales number.
- Barcoding: a set of vertical lines that allow businesses to identify, track, and manage products. Barcodes are often used in automation systems to automatically update inventory levels.
- Movable tracking: a system that allows you to identify a product’s location at all times and determine whether or not it is ready for shipping.
- Fixed tracking: this system allows you to assign and manage locations easily.
Of course, you can combine these types of tracking to seamlessly operate your inventory management system.
Regular inventory audits and cycle count
The warehouse is a dynamic environment with items moving in and out constantly. That’s why you should regularly check and review inventory management.
First, whether you manually use spreadsheets or a system to gather data, it is important to review them regularly. Evaluating this data allows you to identify the weak links and areas that need improvement and make faster, more confident decisions.
Next, it is highly recommended that you perform regular cycle counts. Cycle counts provide you with an up-to-date inventory and a properly valued inventory record. Cycle counts are less disruptive than physical counts, which require a warehouse to cease all operations within the warehouse. Cycle counts advantages include:
- The prevention of inventory loss. Should you not perform them often, you’ll notice the number of inventory has shrunk significantly.
- The control over outdated, old, or damaged items.
- The verification of inventory levels.
- The accuracy of inventory levels.
Cycle counts should be done more regularly on high-value and bestselling products.
It would still be difficult to match the number of stocks with those in the system, however, even with consistent and aggressive cycle counting. This is especially true when you need to manage thousands of items on a daily basis.
Automate and invest in technology
The article has mentioned the advantages of automation several times. It should be clear by now that human errors are costly and time-consuming.
You can start by looking into warehouse management systems. Warehouse management systems integrate the management of inventories, streamline and simplify a number of workflows, collect raw data and automatically analyze them. Not only does a warehouse management system bring about many useful features, but it also automates warehousing tasks, giving you the time to focus more on strategic objectives and look for ways to better manage your inventories. Providing the items are properly scanned and cataloged when they enter the warehouse, you should have real-time visibility into the entire system.
Remember, older systems may be cheaper but are also laggier, and in the end, they may not even be as economical as you initially assumed.
In short, you should invest in a good warehouse management system to automate and simplify the mountains of daily warehouse tasks.
An efficient inventory management system requires plenty of hard work. Despite that fact, in the long run, it will all be worth it. These tips are only a small glimpse into the steps you can take to improve inventory management. If you wish to know more suggestions, feel free to contact us via our website https://www.scssolutions.io/, Linkedin, or Facebook. Let us help elevate your inventory management system.