Good warehouse management is all about efficiency, accuracy, and the steady flow of products in and out of the building. Of course, nothing runs that smoothly without a lot of work, and targeting key areas can disrupt the flow you worked so hard to achieve. From balancing your inventory stock to making your data work for you instead of against you, a lot goes into successful inventory management. So what are some key issues that happen in every warehouse that you should be watching out for?
Guest blogger, Jake Rheude is the Director of Marketing at Red Stag Fulfillment. He discuss inventory management.
1 . Deadstock
Good inventory management is all about good flow — and deadstock is the trash polluting the river. “Deadstock” is just an excess of products, but it can impede a well-functioning warehouse more than you would think. They take up space on the shelves that could be used for other products (best sellers and new inventory alike), and the cost of storing them and maintaining the space they occupy is just not worth it anymore.
This kind of wasteful excess can happen for a variety of reasons, but it usually boils down to not keeping a close eye on how your sales are aligning with your forecasts. By paying attention to which products are not selling as well or as quickly as hoped, you can start to strategize ways to get them off the shelf and decrease future orders.
2. Stockouts and Backorders
Stockouts and backorders are on the opposite end of the inventory management spectrum from deadstock — instead of too much inventory, you have too little. This can happen when a business relies on just in time inventory, which is the inventory management philosophy of carrying as little excess inventory as possible. Such smart warehousing techniques can be incredibly efficient. However, with this method you also run a greater risk of running out of stock if you underestimate demand.
At face value, this can seem like a good problem to have. Who doesn’t want such high demand that you run out of product? And to be fair, backorders can actually sometimes trigger more demand by creating a perception of scarcity and popularity (think of the overnight campers outside an Apple store when the new iPhone gets released). However, they come with their own set of problems.
One of the more obvious issues that having consistent stockouts and backorders can cause is a loss of sales. However, there are many less obvious issues as well. Backorders tend to mean a scramble to get shipments in, processed, and out of the warehouse as quickly as possible, which means scheduling more staff to process everything. Expedited shipments aren’t cheap, and all of that can eat into your bottom line.
Shrinkage is one of those euphemistic industry terms that means lost inventory, whether misplaced, miscounted, or stolen. With the high volume of products that get processed, it’s inevitable that a mistake will happen here and there, but some warehouses tend to have more shrinkage incidents than others. What can you do to make sure it doesn’t happen to your warehouse?
The first thing you can do is create a solid company culture that values accuracy and honesty. Having the right people in your warehouse can play a huge role not only in preventing theft, but discouraging carelessness that results in breakage. In addition to instilling a positive ethos by hiring trustworthy, loyal employees, it can’t hurt to take some basic security precautions. Outfitting your warehouse with security cameras and mirrors to cover blind spots, as well as installing metal detectors at egress points around the facility are a solid way to deter any sort of bad behavior that may arise.
4. Inefficient Operations
There are a million ways to get from Point A to Point B, but in a warehouse, only one of those ways is the most efficient. When you have such a high volume of people, goods, and equipment flowing through your warehouse, you want to make sure that everything is running as efficiently as possible — and that’s where a navigation system can come in handy. There are a few different types of systems, but essentially they ensure that everyone working in the warehouse gets around in the most efficient way possible.
In addition, receiving, put-away, and storage processes should be done securely, like using video to document receiving to prevent theft and fraud. By relying on barcodes or RFID tags to help guide put-away and storage of inventory to the correct sector of a warehouse, you can reduce the chances of misplacing it.
5. Data Silos
Data is a neutral source of information; it is only as useful as you make it. Silos are inefficiencies where data is inaccurate, out of date, or inaccessible. In inventory management terms, a data silo is information about your inventory that can’t be used or accessed by other areas of the business that need it.
As inventory management companies grow, and especially as they expand into new warehouses, they can inadvertently cause a data silo by not ensuring that the new warehouse can access the other warehouses’ inventory data, and vice versa. Inventory data needs to be accurate and up to date with every SKU in every warehouse, and every warehouse needs to be able to communicate that information to each other. All of that data also needs to be available to the company’s website, to ensure that the information displayed is accurate and up to date too. When you close off sets of data, you’re inviting inventory inefficiency into your business. Instead, make your data work hard for you.
Efficient inventory management is more of a moving target than a checklist. As your warehouse grows and changes, so too will your strategies to make your processes better and more efficient. But no matter the size or scale of your warehouse, the issues listed above can happen and wreak havoc, so keep an eye on these problem areas and keep your inventory flow running smoothly.
Jake Rheude is the Director of Marketing for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development.