Managing an inventory for efficiency always involves trade-offs between pick velocity and the space you have available. If an item needs frequent replenishing, it should be situated in such a way that pickers have easy access.
If an item is bulky, heavy, or otherwise cumbersome to handle, it needs to be stored in a way that makes storing and picking easy.
A good example of this trade-off comes in answering the question: should you use forward staging for an item?
Forward Staging and Item Replenishment
Here, forward staging refers to having a set amount of stock in a forward location in your warehouse close to where packing and shipping will occur. When an order for one of these items comes in, an employee will choose items from the forward location for the customer. As the quantities in the forward location get low, replenishment stock from elsewhere in the warehouse is brought forward. The idea is to minimize trips to more remote locations in the warehouse at the same time that you minimize the distance a picker has to travel to get an item.
Forward staging makes sense for popular items—items with “high velocity.” The forward location might have, for example, enough items to fulfill orders for a particular day, getting replenished from a larger stock elsewhere in the warehouse at the end of the day. Ideally, your warehouse management system would be set up to track stock in the forward location, issuing a Low Stock warning when items get low and alerting the appropriate parties that a replenishment is needed. This “replenishment threshold” can be set depending on how fast orders are moving and how long it takes to get the replenishment.
Forward staging does not have to occur in the same facility as storage either. It is a common practice to have a larger off-site facility that is out of the way (usually meaning cheaper square footage) and then have a forward staging area closer to shipping outlets (meaning faster shipment and happier customers). This strategy can save a seller both time and money if the two locations can be successfully coordinated.
Given that, why would anyone choose not to use forward staging? Put simply, there is a limit to how many SKUs can be staged economically. Forward staging makes sense, for example, when dealing with high-velocity items that are always moving. (And, of course, what items those are can vary by season.)
Items that do not move as quickly probably do not need to be staged. In fact, items that are difficult to handle—for example, ones that are heavy or cumbersome—should probably be stored in a standard pick location that gives easy access. The idea is that items that get ordered infrequently, or that take some effort to pick, should not “get in the way” of faster-moving orders.
Deciding on Efficient Inventory Storage
To know what needs forward staging, then, you need to know a lot about your items and their order profiles. For example:
What moves fast and what moves slow?
What items are typically sold together?
Which items are seasonal, and when does their sales velocity pick up?
Which items need strict lot control? Which needs to be first-in first-out (FIFO)?
For peak efficiency, these questions need to be asked and answered with the most up-to-date data available. It is not uncommon for adjustments to be made in staging every couple of weeks.
Why so often? As any first-year business school student could tell you, time is money. When pickers have to travel long distances over and over again to get popular items, that is time wasted. Likewise, storing all of your inventory in a single location can be costly as well. Making adjustments, based on data, helps you get a better ROI out of your labor while helping you contain storage costs.
Perhaps most important, though, is the experience that your customers get. Optimizing the number of replenishments means fewer backorders because the system is already flagging Low Stock situations and, hopefully, triggering the order process. And when packing and shipping occur efficiently, customers can get their orders on time. A little foresight and planning go a long way.