Warehouse Inventory Management Guide: Best Practices, Case
Studies, and Expert Advice
Lisa Schwarz|
Senior Director of Global Product Marketing
Strong warehouse inventory management can mean the difference between your business making
and losing money. In this article, learn best practices and tips from leading experts on
improving your inventory management accuracy and efficiency.
Warehouse inventory management is the process businesses use to organise, track and handle
goods in their warehouses. These goods can include raw materials, finished products and
items in production.
Manufacturers, wholesalers, distributors, retailers and ecommerce sellers need powerful
warehouse inventory management to satisfy customers and fuel growth. Inventory often counts
among the most valuable physical assets on a company’s balance sheet and represents a
significant commitment of working capital.
An accepted rule of thumb is that 90% of inventory is stationary at any given time, with the
remainder in transit.
Warehouse inventory management deals with goods held in warehouses and distribution centres.
Some warehouse management systems can also cover inventory in stockrooms or on store
shelves. Products in transit are also technically part of your inventory from a legal and
accounting perspective if the terms of sale dictate that ownership transfers on delivery,
but these are not always part of warehouse inventory management systems.
Effective warehouse inventory management ensures accuracy and efficiency in order picking and
packing, counting inventory quantities and locations and projections of how much inventory
you’ll need in the future. Essentially, you want to have the right amount of product on hand
to meet sales while making efficient use of capital and avoiding excessive buildup.
Managing inventory involves multiple processes such as:
Receiving goods
Keeping an accurate count of inventory
Designating locations for items
Managing orders
Directing of picking and packing
Processing documents such as invoices, bills of lading and order sheets
Handling returns
Auditing orders and inventories
Analysing and forecasting turnover, demand and reorder
Warehouse inventory management falls under the umbrella of warehouse management, a broader
application that includes other aspects of operating warehouses, including location, design
and operations.
Warehouse Management System vs. Inventory Management System
Inventory management software (IMS) tracks and controls physical goods at key points on the
supply chain. Warehouse management systems (WMS) are comprehensive software suites that
sometimes also address additional functions such as labour management.
Systems for managing warehouses and inventory often overlap. Many WMS include inventory
management capability, and many IMS have the potential to add on modules with features
normally considered to be part of a WMS. But we can broadly summarise the differences as
follows:
A WMS controls warehouses and all their spaces such as bins, shelves, rooms, storage,
movement of goods and workflows. An IMS specialises in managing and counting individual
items or SKUs held in those spaces and related processes such as receiving.
WMS are more complex and add functions such as production and sales. Warehouse management
systems can create and designate SKUs and support kitting, which is when you combine
multiple SKUs in a package under a new SKU. These systems are intended to manage and
optimise every aspect of operating a warehouse or multiple warehouses.
IMS are less complicated and focus on handling a physical product. IMS systems are often used
as standalone solutions in small to midsize organisations with a limited product range.
These companies don’t need the complexity of a WMS. An IMS tracks the total amounts of
inventory in a specific area of a warehouse while WMS is more granular and looks at
individual bins or compartments.
WMS can locate a specific item in the warehouse while IMS generally only tells you a quantity
of a SKU in the warehouse.
The two systems are similar in that they monitor product levels and help manage order picking
and packing, shipping and receiving. Most WMS and some IMS can track and control inventory
for multiple online ecommerce sites, marketplaces and physical selling points, so inventory
reflects all transactions everywhere, a phenomenon called omnichannel selling. Creating
quantity buffers so that you do not oversell is more commonly found in WMS than IMS.
Some specific areas inventory management supports include:
Lead time management
Buffer/safety stock maintenance
Inventory cost calculations and management
Monitoring of shelf life and expiration
Inventory in motion support
Multi-warehouse support and integrations with accounting
Enterprise resource planning (ERP)
Ecommerce
Finance systems and reorder analytics, which recommends timing and quantities for
replenishment
A number of techniques and methodologies help you manage inventories more effectively. These
all seek to minimise the cost of holding stock, streamline warehouse operations and improve
your ability to serve customers.
Among the methodologies are:
Just in Time: Sometimes referred to as JIT, this method is most common
in manufacturing. The approach aims to have materials, components and goods arrive at your
facility or production site exactly when you need them. This process reduces the amount of
inventory that you own, saving money and space.
Cross-Docking: Another efficient inventory management strategy that’s
similar to JIT. As soon as a product arrives, it is shipped. The name cross-docking comes
from the idea of having receiving and loading docks facing each other with goods transferred
across from one to another.
ABC Analysis: Under the so-called Pareto principle, 20% of your products
account for 80% of your sales. In an ABC analysis, you classify your items into three
categories: A for best sellers (usually 20% of your inventory), B for your medium sellers
(usually 30%) and C for your lowest sellers (usually 50% of inventory). You use these
ratings to determine things like where to locate an item in your facility and reorder
frequency.
Two-Bin Method: This method for inventory control is seldom used today.
It involves keeping your working stock of an item in one bin and reserve stock in a second.
The amount in the second bin is how much you will need during the lead time for
replenishment. You reorder as soon as the working bin is empty, and the replacements should
arrive before you use everything in the second bin. This technique ensures adequate
inventory levels and removes the guesswork from reordering decisions.
Fixed Order Quantity: With this system, you order a set amount of new
inventory when the stock on hand falls to a previously identified reorder threshold. This
inventory control method determines how much to order and when to do so. Usually paired with
automated monitoring, this system reduces the potential for human error, such as someone
forgetting a restock order.
Fixed-Period Ordering: This inventory control technique calls for
placing orders at regular intervals, but the quantity will vary every time based on
fluctuations in demand. This method is highly responsive and suitable for use with items
that have significant variability, such as fast sellers or those with seasonal swings in
demand.
Vendor-Managed Inventory: With this technique, you give your vendor
information about your sales trends and business policies. The vendor then takes on
responsibility for ensuring you have the agreed-upon inventory amount on hand. This option
results in reduced procurement costs and eliminates the need to keep safety stock on hand.
Drop Shipping: This method eliminates holding inventory. When a customer
orders an item, you purchase it from a supplier and ship it directly to the customer. Your
overhead costs drop sharply with this approach, but your shipping expenses are higher. You
also run higher risks of stockouts, and vendor management becomes more complicated.
Warehouse Inventory Management Challenges
As you have seen, efficient warehouse inventory management is complicated to execute. Among
the most pressing challenges are the complexity in supplying products quickly when you have
multiple sales channels, juggling competing demands from various buyers and store locations
and keeping track of the needs of your customers and staff.
Many inventory managers say that the highest priority challenge is achieving accuracy in
inventory counts. These numbers are required to produce accurate financial reports and
comply with laws such as the Sarbanes-Oxley Act governing public companies in the United
States.
But accurate inventory is also critical to a business’s financial health. Hold too little
inventory, and you will lose sales to your competitors when you cannot meet customer demand.
But hold too much inventory, and your profitability suffers because you tie up capital
unproductively, occupy too much real estate, miss opportunities and may even have to cut
your prices.
Inventory accuracy impacts your ability to fulfil customer orders and maximise profits. If
you think you have an item that you don’t, you may accept a customer order that you cannot
fill. If you don’t believe you have an item that you do, you may order more than you need.
Similarly, you need to know where each item is because searching can delay an order or cause
you to cancel it.
Determining how much inventory is just right is complicated. Historical trends can
offer a yardstick. Still, there’s a complex interplay of other variables at work too. These
include fluctuating demand, competitor behaviour, product perishability, innovation, length
of the sales cycle, seasonality, manufacturing time and industry trends.
If you manufacture beach umbrellas, it’s a safe bet you’ll want to hold fewer in inventory in
winter than summer. But imagine how much more complicated this calculation gets if you
produce oil drilling equipment that takes months to build and demand from exploration
projects varies with the price of oil, the pace of discoveries, regulatory changes and other
factors. Skilful warehouse inventory management can make a critical difference in your
profitability.
Warehouse Inventory Management Benefits
Benefits of strong inventory management include better productivity; faster picking; savings
of time, money and labour; greater accuracy in orders and inventory counts; decreased
losses; more satisfied workers; smooth-running operations and omnichannel success.
Applying technology to the challenges of warehouse inventory management addresses many
inefficiencies, including:
Mispicks and Missed Shipments: Mistakes in picking inventory due to
human error can be costly for a warehouse in lost time. When a warehouse ships those items,
it becomes even more expensive with returned shipments, loss of customer trust and rushed
orders. Software can help eliminate most, if not all of these mistakes with barcoding, QR
codes and other sensor technology as well as bin management, ensuring warehouse staff pulls
the right inventory at the right time, regardless of training.
Counting Errors: Annual or twice-annual inventory checks where the whole
staff gathers to go over inventory through manual or physical counts needs to become a thing
of the past. Manually doing these counts introduces the chance of errors. And what happens
for the rest of the year? Are businesses satisfied to only have an accurate count of
inventory part of the time? Using automated systems with scanners that store data centrally
and updates in real time ensures accurate counts and eliminates additional administrative
costs and inefficiencies.
Manual Picking: One of the most significant expenses of any warehouse is
staffing. Inventory management software is well equipped to address this. Modern software
packages can inform staff not only about the location of inventory but also the best route
to take when pulling multiple orders. Armed with this information, warehouse personnel can
do more work in less time. Additionally, when turnover occurs, it doesn’t take new staff
members months to understand the layout of the warehouse and the location of items.
Overstock/Understock: Warehouses confront a dilemma in how much
inventory to keep on hand. Carry too much stock, and your capital is tied up in products
that aren’t selling. Moreover, there are costs to store and manage that inventory,
particularly items with limited shelf life. Carry too little, however, and the business runs
the risk of stockouts and an inability to meet customer demand. Modern inventory management
systems, particularly those tightly integrated with the ERP system, can help with
forecasting and demand planning, ensuring that the perfect amount of inventory is on hand.
Advances in artificial intelligence (AI) can eventually help businesses account for
previously unforeseen circumstances based on things like the weather, customer demand or any
range of events that can impact product demand.
Reconciling Incoming Shipments: Too many warehouses still rely on manual
processes for counting and reconciling incoming shipments, which can be error-prone and
costly. Barcode scanners and other sensors tied into a warehouse management system not only
reduce those errors but also create better working conditions for employees, leading to
higher employee loyalty and less turnover and training.
What Is Warehouse Management Inventory Control?
Warehouse management inventory control
helps you achieve maximum profit with a minimum investment in inventory while not hurting
customer satisfaction. The key is to have the right amount of inventory on hand. Slow-moving
products may be kept in relatively few units, while fast-sellers will have more stock.
Efficient inventory control can have a big impact on your profitability. According to the
Federal Reserve Bank of St. Louis, U.S. retailers are holding $1.44 in inventory for every
$1 in sales. The 1,000 largest non-financial companies have an average 51 days of inventory
on hand, according to an analysis by The Hackett Group.
To achieve optimal inventory control in your warehouse, you need to know when to replenish
supplies and by how much, monitor turnover and shelf life and have an up-to-the-minute and
accurate accounting of inventory.
Handling Physical Inventory in Warehouse Management
Handling physical inventory is an essential focus for warehouse management, and the primary
goals are to know precisely how much of each inventory item you have on hand and where to
find it. Best practices include techniques for tracking and counting inventory.
David Altemir, President of Altemir Consulting, says accuracy in stock locating is pivotal.
“Ensure that items are correctly located in your warehouse management system upon their
receipt,” he recommends.
“Having a sound set of physical warehouse locations defined in the system, together with
ensuring that purchase receipts are transacted accurately, will prevent perceived
material shortages and needless inventory adjustments because items could not be
physically located.”
Label Everything: Use scanners, barcodes, RFID tags, QR codes, NFC tags
or other systems for controlling inventory, equipment and locations. Employ SKUs to identify
items. These tools will assist your efforts to fill orders efficiently and keep accurate
inventory counts.
Monitor Constantly: Warehouse specialists say using both fixed and
movable tracking is important for inventory efficiency. Fixed tracking is the continuous
monitoring of assets such as manufacturing machinery or order fulfilment equipment for
location and condition. Movable tracking monitors where each product or unit of inventory
is, how many you have and which need reordering.
Employ Cycle Counting: While many companies do a complete physical
inventory once a year, pros advocate a method called cycle counting. This process involves
counting part of your inventory on a rotating basis so that over a given period, you will
have counted everything and cross-checked it with your records. Schedule physical counting
in advance.
Some experts recommend counting all products at least once a quarter; others suggest focusing
on the 20% of your inventory that accounts for most sales or profits. You can also do a
random sampling.
In reality, your approach depends on resources, such as how many people are available to
dedicate to the task. If possible, use a consistent crew of trained people each time, and
ensure they are not from the ranks of staff who might create input errors. Otherwise, they
will have a stake in covering up inaccuracies. Have two people count every item, and compare
their counts for accuracy. Post counts to keep inventory in check.
If you find errors, try to determine the cause so that you can improve your processes.
Remember that you do not necessarily have to touch each item physically. For tiny parts, for
example, you could weigh them.
Do cycle counting when order picking is not active and you have accounted for all shipping
and receiving. Lastly, whichever system you use to rotate through inventory items, stick
with the same pattern. The more frequently you do your count, the more accurate it will be.
Don’t Forget About Items in Limbo: Inventory counts lose their utility
if you disregard items in limbo, such as goods on your receiving dock which have not yet
been processed and are not reflected in your counts. Similarly, returns are often thrown
together in a bin for sorting later. But if you don’t scan them into your system, you will
likely lose sight of the fact that you have them and not be able to sell them. That
represents lost revenue.
An efficient arrangement for inventory helps streamline counting, storing, picking and
pulling. The best way to organise your warehouse depends on your specific needs. Here is a
step-by-step process for assessing your space and needs and then designing the right
organisation.
Gather Information: Whether you are moving into a new space or
revamping an existing one, start by gathering plans or documenting the area by measuring
it yourself. Then ask questions such as:
How much space do employees need to do their jobs properly?
How do current and future trends in our business impact the layout?
Has there been a significant increase in orders since the space was originally
designed?
Will there be a major new product introduced with different requirements?
Will specific inventory strategies impact the layout, such as wave picking and
cross-docking?
How can we maximise the efficiency of our operation through a smart layout?
Design an Efficient Floor Plan: Next, sketch out a layout that
designates adequate space for receiving, inventory storage, packing, shipping and office
functions. A manufacturer would also need to include assembly and/or production space.
Remember to allow clearance for pallets, doors and gates. Leave enough room for pathways
and aisles so people and equipment can move easily, including around corners. Resist the
temptation to scrimp on the receiving area. Staff will be more prone to receiving errors
if they don’t have adequate space, especially to handle the paperwork.
Use a Strategic Inventory Layout: Slotting, which is the process of
designating a location for goods, can be done in a variety of ways, but make sure that
your most popular products (from an ABC analysis) are highly accessible. Retrieving
products from inventory is the most labour-intensive operation in manually run
warehouses and a highly capital intensive one for automated warehouses. So, improving
the productivity of order picking is a top priority. Many warehousing experts urge you
to locate the fastest-selling products nearest the packing area. If you are in a
seasonal industry, these products will vary by time of year. Don’t forget to maximise
the use of your vertical space with slower-moving products in less-accessible spots.
Choose Storage Wisely: Pick racks, shelves, containers and bins
that are versatile, allow for good traffic flow and are compatible with your equipment
such as forklifts. The exact type and size of storage will depend on your operation and
products. Take time to decide whether to use a dedicated/fixed bin system (in which you
store a certain item of inventory in a particular bin) or a random/floating bin system
(in which you put an item in any available bin). The tradeoffs are space efficiency,
accessibility and amount of handling. Fixed bin systems are estimated to require 65-85%
percent more space. Effective Warehouse Layout
Warehouse Inventory Management Software and Inbound Logistics
Inbound logistics are the main sources of a company’s transportation costs. A warehouse
management system can ensure products meet a company’s requirements by automating
inspections and tracking vendor quality with mobile applications for receiving, picking and
cycle counting.
As employees receive purchase orders, they can track what’s overdue or have been identified
as a critical item for follow up.
A WMS can also help with quality assurance, providing detailed inspection plans, tracking
items that fail and expediting returns. Sophisticated systems will also offer container
tracking for inbound shipment management to assist in updating and receiving all purchase
orders within the software and providing landed cost calculations.
With a WMS, companies can quickly and easily find low-cost carriers and more accurately
manage inventory to help avoid stockouts, overstock, overbilling and maximise efficient use
of space. Additionally, with a real-time system to track inbound logistics, a company can
ensure it is compliant with any rules suppliers may have around storage and handling.
Warehouse Inventory Management Software and Outbound Logistics
On the outbound logistics side, warehouse inventory management software is critical to a
business’s relationship with its customers. For most supply chain professionals, on-time
delivery is the most crucial customer service metric.
Others rely on what is known as the perfect order. The order is delivered to the
right place, at the right time, in the right condition, in the right package, in the right
quantity, with the right documentation, to the right customer, with the right invoice.
Again, delivering the perfect order is made considerably easier with WMS software,
particularly software that is tightly integrated with, or even better, built on the same
platform as the manufacturing and inventory management system.
For example, with integrated software, fulfilling an order is streamlined. Once the order is
approved, even with a complex workflow, the system can send it straight to fulfilment for
efficient pick, pack and ship processes.
Picking becomes easier with handheld, mobile devices that show pick locations through
easy-to-use interfaces. Advanced systems can allow businesses with multiple subsidiaries to
define which sites can fulfil which items under pre-defined conditions. These tools make
fulfilment both more straightforward and more efficient. Meanwhile, common warehouse
functions such as task management, user-defined putaway/pick strategies, cycle counting,
work orders and kitting are simpler and automated, allowing for suggested putaway and
multi-order picking within the WMS.
Businesses operating without warehouse inventory management software are already at a
disadvantage as cumbersome manual processes can introduce errors, delay shipping, ship
incorrect orders and negatively impact customer loyalty. Additionally, cumbersome internal
processes can result in poor use of warehouse resources, improper handling of perishable
goods and unnecessary expenses.
A WMS tightly integrated with inventory management, manufacturing and financials give
manufacturers, retailers and distributors real-time insight into the business, allowing for
data-driven decisions for more efficient operations and improved customer satisfaction.
Experts Share Warehouse Inventory Management Best Practices
Warehouse inventory management best practices optimise the handling of inventory, picking
methods, quality control and inventory counting. Experts also emphasise the importance of an
improvement mindset.
Focus on Process Improvement: Make it a priority to set
well-documented standards and procedures, says Jeremy Banta, a director of the Warehousing Education
and Research Council and coordinator of the Supply Chain Management Program at
Columbus State Community College.
“Before looking at external inventory control solutions, or new technology,
businesses should look inside for areas to improve inventory management. Do you
simply fix inventory issues, or do you find (and solve) the root causes?” he asks.
“A formal process improvement program is the key to not only better inventory
management but maximising overall efficiency in your operations,” he contends.
“The most common mistake I saw (and still see) is throwing away the plan when
things get busy. The just-get-it-done mentality at peak can destroy six
months of hard process improvement work in just a few hours. If your management
team sends the signal that standards only apply when it’s not busy, they’ve just
told everyone that the standards don’t apply at all.”
Invest in Technology: Automate wherever possible. Warehouse
automation is expensive, but automated storage and retrieval systems (AS/RS) have
enormous benefits such as being able to update inventory quantities in real time, reduce
errors, lower labour costs and increase space efficiency. Voice-guided picking, in which
workers get picking instructions through software-connected headsets and wearables such
as Google Glass, are now available. Companies often employ partial automation. Whether
you use a man-to-goods system in which workers move around the warehouse to fill orders,
AS/RS or a hybrid, the choice will have a big impact on your warehouse inventory
management. Warehouse and inventory management software are also imperative for most
operations. According to a 2017 study by Wasp Barcode, 43% of small and medium-sized
businesses either do not track their inventory or use a manual process, so there is a
lot of potential for improvement.
Save Labour With the Right Picking Process: The picking model you
use depends on factors such as product volume and may change over time with business
conditions. Nevertheless, businesses are always trying to speed up picking and delivery
times while reducing costs and errors. Many warehouses use a combination of methods.
Piece picking is old school. A worker moves around the
warehouse, retrieving items for an order.
Part to picker is the opposite. Pickers stay in one spot, and
equipment automatically brings them items. While this is technically the most
efficient method, it requires a degree of automation that most companies find
prohibitively expensive.
Wave, batch, cluster and zone picking are the most efficient
models.
Wave picking designates a sequence so that items are
picked for an order in one trip through the warehouse with no duplicated
steps. This process makes the warehouse layout crucial, including
whether there is enough space between aisles for two-way traffic.
Batch picking builds on the wave method by filling
multiple orders at a time. This method works well when several orders
require the same item. Pickers travel to the location once and can bring
all the items to a staging area where they can sort them into individual
orders.
Cluster picking has pickers moving along a path with a
cart carrying a bin or tote for each order, picking items for multiple
orders simultaneously. There are automated systems that emulate this
method.
Zone picking assigns each worker to a specific area,
and workers pick only the products in their zone. They deliver the
products to a staging area where they are combined with items from other
zones. Zone picking is often a good choice if the warehouse is enormous
or if there are different handling requirements for some inventory, such
as refrigerated items.
Priority Picking: You pick certain orders with higher
priority based on designated criteria, such as whether the customer paid for
next-day delivery; the product is perishable, near expiration or has a short
shelf-life; the order follows a customer return due to defective product or
order fulfilment error; or the customer is among your most important.
Set Balanced Stock Levels: By analysing your sales, lead time and
turnover data, you can determine maximum, minimum, average and reorder levels for
inventory. This keeps costs down, minimises waste, prevents order delays and uses
warehouse space most efficiently. Altemir says companies often set safety stock
levels incorrectly.
“The common intuition is to prescribe a minimum inventory level based on average
demand. However, the purpose of holding safety stock is to guard against sudden
variations in demand …,” Altemir explains.
“It is better to design safety stock levels using statistical techniques that
characterise demand variability, rather than average demand. By doing so,
inventory reductions of as much as 20- 70% are possible while still ensuring
fulfilment rates greater than 95%.”
Quality Control Matters: Double-check order accuracy to prevent
returns, customer complaints and order cancellations. Order pickers may verify a SKU
with a barcode scanner when selecting the item, and packers then repeat the process. You
want to balance speed and accuracy, so choose the checkpoints based on where your
warehouse has the most frequent errors.
Keep the Inventory Area Tidy: Build in time at the end of every
shift for clean-up. Make sure aisles are clear, floors are clean and there are no
slipping or tripping hazards. Put the equipment away. These practices help maintain
productivity, prevent injuries and accidents and help employees do their jobs well.
Safety and Security Are Important: Restrict access to the inventory
area, and require staff to wear ID badges. Keeping outsiders and staff from other parts
of the company out averts theft and misplaced products and reduces the potential for
accidents. Maintaining high safety standards will boost worker productivity, keep
equipment functioning longer, aid in quality and reduce insurance claims.
Warehouse Inventory Management Case Studies
Companies that improve their warehouse inventory management reap real-world cost savings and
operational efficiencies. For example, Akustica Inc, a unit of Bosch Group and manufacturer
of silicon microphones for consumer electronics, implemented NetSuite software and gained
visibility and control over inventory that was in-house as well as in third-party warehouses
in the United States, Europe and Asia. Learn more about how Akustica uses NetSuite for inventory control.
“Because we now have accurate, real-time data, we’ve been able to greatly reduce the number
of physical inventories we have to perform. We can now schedule inventories every six months
to a year, and our process is still very auditable,” says Bryan Bishop, director of supply
chain at Akustica.
Ibex Outdoor Clothing, a Vermont-based maker of natural wool garments, saw its business
expand dramatically, but its systems were not able to adapt. This growth caused picking and
fulfilment errors.
“As we continue to add products, we have to use every nook and cranny of our warehouse to
house our inventory,” notes IT/operations manager Jay Moltz.
Investing in new software that included mobile functionality resulted in a huge efficiency
boost to Ibex’s packing speed — cutting order fulfilment time by more than half and
decreasing mispicks by 98%. Read about other inefficiencies Ibex Outdoor Clothing
overcame.
Lacrosse equipment retailer SportStop similarly saw inventory
efficiency gains from adopting more robust software, saving the equivalent costs of
10 full-time employees. It was also able to reduce inventory waste, enabling the company to
increase sales by 34% with just a 10% increase in inventory.
How to Pick the Right Warehouse Inventory Management Software
If you are ready to implement warehouse inventory software management, you will want to
assess your needs and the features and functions of different solutions. Below are some of
the most significant considerations.
Choose the Features That You Need
You will, of course, want a solution that meets all of your current needs, but you will also
want it to grow with you and meet future requirements.
Real-Time Monitoring: To maximise your business, it’s imperative
that you know what’s in inventory in real time. This process involves deducting items
immediately upon purchase and adding to stock as soon as you receive goods. Having this
capability is imperative for JIT or if you want to understand your inventory velocity
for more accurate ordering decisions.
Modular Design: Having the ability to add modules that offer other
features and functions can accommodate future growth. A benefit of modular design is
that you can choose a system that meets your current needs without having complex
features that you don’t yet require.
Location Tracking: The feature monitors where you store an item
within your warehouse and makes picking more efficient. Location tracking usually
works with scanners, RFID and similar systems. You may have set or default locations for
certain items, or your putaway may use dynamic strategies. You might even have the same
SKUs stored in multiple locations simultaneously, and software can help you track all of
this.
Multi-Warehouse Support: Companies with more than one warehouse
need software that can support multiple locations and easily accommodate any additions.
Look for software that keeps a centralised log of inventory counts and locations.
Mobile-Friendly: The rise of mobile devices has been a game-changer
in warehousing and logistics. As such, your software should work seamlessly with
smartphones, tablets, scanners and other tools your staff commonly use, so that all
stakeholders have access to the same, real-time information.
Receiving and Putaway: Record incoming shipments and where you
store every item. Allocate bins and perform slotting in the most efficient way possible.
Ecommerce Support: You want software that will support all your
selling channels, which might include your website, Amazon, eBay, social media, physical
locations and more. Look for real-time, two-way inventory syncing to avoid
overselling.
Picking: Plan your order picking to eliminate extra movement,
including planning for strategies such as wave and cluster picking.
Inventory Cost Analysis: Having good visibility into how much you
are spending on inventory is important. Aside from the cost of your products, you need
to factor in such expenses as inbound shipping, insurance and carrying costs like
utilities and warehouse ease payments. Some software can support cost methods such as
FIFO (first in, first out), LIFO (last in, first out) and WAC (weighted average cost),
but that capability is more commonly found in ERP and WMS.
Reporting Tools: The ability to generate alerts and notifications
is useful. Many solutions can monitor inventory levels and notify you when stock is low
or it is time to reorder. Solutions also offer standard and customisable reports. These
reports generally include inventory analysis by product, individual customer sales
history, reorder reports and inventory by SKU or other characteristics. Dashboards
provide a quick visual snapshot of key metrics that matter to you.
Why You Don’t Want to Use Excel for Warehouse Inventory Management
Many businesses start off tracking inventory with manual processes using spreadsheets, but
Excel and similar programs have flaws as inventory management tools. While these tools are
inexpensive, inventory management mistakes could be eating up your profits. Here are some of
the challenges of using Excel for warehouse inventory management:
Labour Intensive: Excel spreadsheets require manual counting,
verification and data inputting.
Error Prone: This amount of human involvement creates a big
potential for errors in data entry and counting, especially as your product line and
inventory grow.
Access Restricted: If you are using one Excel workbook, only one
person can edit it at a time. This limitation forces others to act without the benefit
of up-to-date information and increases the potential for errors.
Out of Sync: Your spreadsheet will not automatically update in real
time, so at any given moment, you never really know exactly where your inventory stands.
Limited Analysis: Generating forecasts and analysing historical
data is much more difficult in Excel.
Expert Tips on Selecting Inventory Management Systems and Software
As you compare solutions and vendors, experts recommend evaluating potential products on
several criteria. Be sure to ask the following questions:
Will the application integrate with your finance or accounting system? Integration is essential to eliminate manual workflows, and vendors usually offer
multiple integrations. Ensure the solution supports the system your finance department
uses currently.
How disruptive will implementation be? Ask vendors how much
downtime will be required for installation and setup. See if they will find ways to
reduce the impact, such as rolling out the solution during a quiet time or in phases.
What are the hardware requirements? Review the need for barcode
scanners, label printers, POS systems and other devices. Many vendors are now making it
possible for your staff to use smartphones and tablets rather than specialised equipment
for some functions.
Does the vendor have expertise in your industry? It’s critical the
inventory management system can handle your products and vertical. A clothing company
will have different demands for an IMS than a bulk commodity wholesaler. One might be
tracking style, size and colour while the other cares about storage temperature and
weight. If the solution has never been used in your industry, be wary.
Does the software support your specialised requirements? While IMS
providers often promise they can perform many WMS functions, the applications may not be
adequate if you want sophisticated functionality like voice-directed picking. Also, if
you are in a vertical that requires a lot of traceability or one that uses catch weight
management (tracking both the average quantity of an item per weight as well as the
actual), those usually require specialised applications.
Create a More Effective Warehouse With NetSuite’s WMS and IMS
Being efficient in managing inbound and outbound logistics demands warehouse inventory
management software. Warehouse management solutions can track software along every part of
its journey within the warehouse down to the bin level. Native NetSuite offers simple
inventory management capabilities through multi-location inventory, bin tracking and cycle
counting. The WMS module offers functionality that helps streamline your warehouse
operations while adding many industry-leading features such as mobile RF barcode scanning,
strategy definition for putaway and picking, task management, returns authorisation receipt,
cycle count plans and more. NetSuite WMS can help you increase efficiency, improve
operational excellence and lower costs for warehouses.
In this article, learn about inventory management and its related disciplines from inventory
experts. At the end, you will find an FAQ list on inventory…
