We all know that effective inventory management is crucial to keep up with customer demand and prevent dissatisfaction. You may be surprised to hear that we still have merchants come to us who are using endless spreadsheets and paperwork to keep track of their inventory levels. As businesses grow and order volumes increase, this can start to make inventory control very difficult.
Reliable inventory management systems are one of the easiest ways to help tackle this problem. However, investing in this technology is only one part of the equation. They must work in conjunction with streamlined and efficient warehouse processes to help keep you fully in control of your inventory.
Consider these 9 tips to help you get the most out of your warehouse:
Keep inventory levels sensible
Keep an eye on your inventory levels to avoid overextending on slow moving items or under buying your best sellers. Although inventory management systems will be crucial here, they must work in real-time to ensure goods coming in and out of the warehouse are recorded instantly. You also must keep an eye on your reports to ensure you only stock your best sellers and fade out your worst sellers.
Enter received orders promptly
When a new delivery arrives, record it immediately. This requires discipline, especially when you’re busy managing employees, placing new orders, and juggling deliveries from different suppliers. But if you sell a product before it’s been properly recorded, things are going to get a whole lot messier. Pausing to enter your receipts immediately saves you time and headaches in the long run.
Reduce errors with barcode scanners
Your staff should be recording incoming deliveries instantly, but this runs the inherent risk of injecting errors by manually entering goods into your inventory systems, especially in the event of high sales volumes or if your products look similar to one another. Barcode scanners can help. Take full advantage of this technology to smooth receiving and sending deliveries, and when performing inventory counts. Scanning bypasses manual errors and works much faster than writing or typing in individual counts.
Perform regular inventory counts
Perform inventory counts regularly to help improve your inventory control and reduce discrepancies within the warehouse. Performing a full inventory count of your warehouse is not necessary every time, though. Instead, you should split your products up into more focused lists of products in cycle counts. There are a number of ways you can divide up your products, but two specific counts can really help with improving your inventory control:
- High value: As the name implies, high value counts inventory all the products that have the highest cost or potential sales value, ensuring your most cash-intensive products are always well tracked.
- High risk: Any products that have historically had the largest discrepancies during inventory counts, are prone to theft, or have had the most inventory corrections performed against them due to returns and breakages are high risk items. By performing periodic counts of this inventory, you and your team can discover exactly why these products result in so many write-offs and work to mitigate them before they can cause too much damage to your inventory control.
With this in mind, your WMS (warehouse management system) should allow you to perform these cycle counts regularly with very little effort required from your team. A powerful WMS scans a location and all the products within that location before moving to the next, resulting in a completed list that can then be reviewed, accepted, or rejected before updating your core inventory levels.
Keep an eye on your operational KPIs
KPIs (Key Performance Indicators) drive your business, assessing how well your business fares against its goals and where things may need improvement. Analyzing your warehouse and inventory management processes are no different. We recommend you keep an eye on these three metrics, at least:
- Perfect Order Rate: Do your customers receive the right products in the promised condition and time frame? Find out by calculating the total shipped orders for the month versus those orders you had to re-ship or received complaints about.
- Processing Cost per Order:How much does it cost you to get each order out of your warehouse door? Calculate this by adding both your fixed and variable costs together and divide by your total number of shipped orders in that time period.
- Order Fulfillment Latency (or Lead Time):How long do your customers wait to receive their products from their order creation date? Although no set equation to calculate this metric exists, it’s still vital to keep an eye on customer deliveries and possible delays in order to help prevent customer dissatisfaction and complaints.
Is Just in Time (JIT) ordering best for your business?
Just in Time ordering, or JIT, is a strategy that can help mitigate risks associated with inventory management by offsetting those risks to the manufacturer themselves. Instead of large occasional warehouse deliveries, goods only arrive when they are needed (just in time), which often reduces costly wastage problems and save vital warehouse space. However, in order for this process to work well, you will need to have strong relationships with your suppliers and trust that they will send the items at the agreed times.
Stay vigilant with 3PL companies
If you outsource your warehousing or use 3rd-party logistics (3PL) companies, you will need to design your inventory management processes carefully. While 3PL companies have their own systems to keep track of inventory, you’ll need to ensure that your systems update as well. This is either a manual process or you can integrate your data with your 3PL’s systems via EDI (Electronic Data Interchange). Lots of great companies out there can help you with this, such as SPS Commerce or B2B Gateway to name just a couple.
Remember to account for your consignment inventory correctly
If you accept products on consignment from distributors (and don’t pay for goods until you sell them) then you have an inventory challenge to manage. You don’t own these products, so while you want them to be available to sell on all channels, they shouldn’t appear as assets on your inventory value report. One way to deal with this would be to record this inventory within a “virtual warehouse,” allowing you to fulfill orders efficiently and filter reports to exclude the inventory from this warehouse.
Invest in the best technology for your industry
From keeping on top of your inventory control with reliable inventory management systems, to using integrated WMS with barcode scanners, there are a myriad of technologies around that can help you speed up your workflows and reduce processing costs. However, while some companies claim to support all types of business, we know that processes can differ considerably across industries and business type. For instance, ecommerce businesses are generally characterized by smaller orders, higher return rates, and use a variety of shipping carriers. Therefore, our advice would always be to ensure you’re investing in technology that has been designed and built for your particular industry, as opposed to a “one size fits all” approach.
Ready to start getting the most from your warehouse? Search for Inventory Management Software on our Product Selection Tool, or call for a free 5-minute consultation with a Technology Advisor today.
Justine Cross is the Content Marketing Executive at Brightpearl – a cloud-based ERP for retailers and wholesalers. Brightpearl allows you to provide a truly omnichannel experience for your customers, whilst unifying all of your sales channels, inventory, accounting, CRM, suppliers, fulfillment, warehouse management, reporting and POS in one single system.