How to Achieve Inventory Certainty—and What Happens When You Fail

“Inventory Certainty” is a term of art in warehousing and fulfillment circles. It simply means having accurate, real-time counts of your inventory available in such a way that it is useful and timely. While it seems easy, inventory certainty is vital for today’s efficient warehouses.

How to Achieve Inventory Certainty

In fact, most warehouse and fulfillment teams believe they have something like inventory certainty, but in reality, they do not. And when they fail to have that certainty, entropy creeps into the system. Small errors begin to grow out of proportion, and then the real trouble begins.

But understand the problems, and you can begin to see the solution. Understand the term of art, and you can begin to see how to piece together a system that gives you true inventory certainty.

Problems That Come from Not Having Inventory Certainty

There are a number of problems that can come from not having inventory certainty. For example:

• Suppose you are experiencing a sudden surge in orders, which depletes your stock. The next week, you think your warehouse has enough inventory to cover the orders until you can restock...until the warehouse manager calls, having run out of a popular item. Now you are in a Backorder situation.
• Now imagine the opposite: You have the right number of products for a certain SKU, given demand, but your team is working with old data and so predicts an inventory shortfall. They begin the process of acquiring more inventory to make up the difference. Now there will be excess inventory, and you will be in an Overstock situation.
• Over time, delays in acquiring data cause your warehouse to fluctuate between Overstock and Out of Stock situations. Floor space is taken up by non-moving items, but fast-moving items never seem to be on hand, creating congested warehouse floors and unnecessary delays.
• Inaccurate data on inventory make loss and theft harder to detect and prevent.
• Inaccurate stock levels are communicated to vendors, partners, and ecommerce sites. The company’s brand is damaged, as it comes to be seen as less reliable. Supply chain problems arise as vendors and partners work from inaccurate information.

What is Needed to Get Inventory Certainty?

If not having inventory certainty is such a recipe for disaster, how can one go about getting inventory certainty without extensive investment or disruption to current operations?

As the definition above shows, there are essentially two halves to the certainty pie. You can get each in place by using the right kind of inventory management software.

The First Half: Real-Time Data and Updates

Having a system that updates inventory levels in real time is key. Infoplus, for example, can update inventory levels as items are placed, moved, picked, and shipped. It can integrate with most RF guns and other scanning devices, meaning the counting and updating are perfectly automated. As items flow through the warehouse, their progress is tracked and anyone with access to the dashboard can track the items in an order.

If your management software is trafficking in real-time data, there will be a number of efficiencies realized as well; you’ll be able to improve delivery times, simplify labor management, and greatly enhance customer service.

The Second Half: Available Data That is Useful and Timely

Collecting reams of data is a completely academic exercise if you are not able to use that data in a timely fashion. To do this, the system must be structured in such a way as to trigger appropriate action when certain patterns in the data become evident.

Here’s a concrete example: Suppose you are collecting data on item velocity. The software recognizes that, given the current rate of orders, item X is set to be depleted within a month. You know that it takes about three weeks to get a restock from the items’ supplier. Fortunately, you have already set up a trigger in the system so that, when the inventory gets low (roughly a month remaining) a reorder is automatically triggered. This way, you never run out of stock or enter a Backorder situation as described above.

In addition to the reorder, you yourself receive an alert, as does the floor manager and the shipping manager. Receipt of the new items is verified by the workers in your loading dock and checked against the reorder. Sales velocity is also noted in the company’s sales reports and, ultimately, financial reports.

In all these cases, data about Low Stock inventory level and reorder need to be readily available, at just the right time. This is what it means for real-time data to be useful and timely: It must trigger the appropriate actions in the appropriate contexts.

Inventory Certainty 'Pie' With Infoplus

Having the whole pie is possible, but it takes software that is built the right way. It must track inventory in real time, incorporate management by exception, and employ the right integrations. This is why we made these features the bedrock of the Infoplus solution. If you would like to see how the features work in action, contact us.