Inventory management can be a complex task for many warehouses. While implementing inventory management best practices can be challenging, they can enable you to more accurately communicate with customers, fulfill orders, and make the best use of resources. Here are five best practices that can help you optimize inventory management.
Use ABC Analysis to Categorize Inventory by Value
ABC analysis is a method of categorizing items based on value added to your business. For example, you can determine the annual value of a SKU by the annual number of items sold. This allows you to categorize by Class A items, Class B, Class C, and so on. You can give greatest priority to Class A items by focusing time and resources there. As another example, you can make sure to complete orders for Class A items first, then B, and then C.
Based on the volume within each class, you can optimize warehouse space by allocating the greatest amount of space to Class A items, with Classes B and C following. In the same way, knowing which products you carry are in highest demand (greatest number sold per period) can help you forecast with greater accuracy and plan how much space will be needed. If you are carefully monitoring this and reassessing every period, you’ll be able to see seasonality and when items are trending. This can have many positive ramifications, including improved customer experience and better insight into inventory turnover.
Start Tracking Batches of Inventory
Once you have categorized the products in your warehouse into groups, you can more easily track inventory movement along the supply chain. Batch tracking is one method of grouping and monitoring inventory by batch number. Batch tracking is especially useful for products that carry an expiration date and can help you locate and source defective items as well. Batches should have similar characteristics, especially in the case of expiration dates.
With dozens or more of cartons or pallets of inventory in your warehouse, knowing which batch a particular product came from can help you quickly and easily resolve issues, monitor inventory levels, and communicate with customers about the status of their products. While mistakes can happen in a warehouse, a main benefit of batch tracking is that you can explain transparently to a customer exactly what happened and rectify a situation swiftly, rather than investigating the matter and keeping a dissatisfied customer waiting for answers.
Try Counting Inventory in Frequent Cycles
Many 3PL warehouses may perform an annual count of inventory. However, counting more frequently can give you a more accurate picture of your inventory levels year-round. Cycle counting refers to the practice of counting batches or groups of inventory on a continuous basis. You can implement cycle counting by performing regularly scheduled counts by SKUs, areas of the warehouse, or A, B, and C products. The frequency of such counting will largely depend on the staff resources available to perform regular counts.
Cycle counting typically involves matching physically counted inventory with recorded inventory. A more concrete understanding of your actual inventory levels throughout the year allows you to audit your existing processes and make improvements. This can empower you to become more efficient with time and money, optimizing resources like floor space, security, labor, and more. It can also enable more accurate and timely communication with your customers which, in turn, makes for longer term, stronger relationships.
Optimize Picking & Packing
Picking and packing is an essential process for third-party logistics (3PL) warehouses, especially those capitalizing on increased demand for ecommerce or omnichannel fulfillment. However, an optimized picking and packing process is important to reduce errors and provide a seamless customer experience. Automating as much of this process as possible further reduces the opportunity for mistakes.
To automate successfully, certain tools and best practices need to be in place on the warehouse floor. For starters, packing stations should be complete with barcode scanners and carts can be set up in the warehouse with barcoded bins. The right tools, such as barcode scanners and a warehouse management system (WMS) can streamline picking and packing by reducing manual tasks and allowing for high-volume label creation. For example, in Small Parcel Suite, you can track and regulate pick projects, print up to 1000 labels at a time, and even shop rates all from within one application.
Use a Cloud-Based Inventory Management System
Lastly, a cloud-based inventory management system allows you to see pick and pack jobs, inventory levels, and track shipments from anyplace where there’s internet access. This allows for many users to access and record information in the moment, improving communication and consistency not only between staff, but to customers. Furthermore, complicated paper-based systems can be difficult to learn for new employees, leading to mistakes and missed messages.
Unlike time-consuming manual processes, an inventory or warehouse management system can be flexible enough to scale as your warehouse grows. In addition, an inventory management system can provide reports on stock levels, transactions, batches, warehouse locations, and more. This greatly reduces the effort needed to truly optimize inventory turnover.
Click here to learn about how 3PL Warehouse Manager can help you efficiently manage your inventory.
Written by Carrie Weinberg
Carrie Weinberg is both an analytical and creative product marketer with a history of developing growth strategies that drive financial success, increased brand awareness, and positive brand equity. With experience in the nonprofit, small business, and corporate sectors, she is able to holistically evaluate organizations, create common ground, and produce content that aligns with the challenges and opportunities of companies in a variety of industries. Her passion for the customer journey and understanding of the target markets of a company allow her to help businesses find the tools they need to become a strong and profitable organization.