Never wonder whether you're managing your inventory efficiently and cost-effectively again with this dive into best practices, common mistakes and key upgrades.
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Understanding Inventory Management is one of the most important parts of running a warehouse. Learn why and how to utilize your space and inventory wisely.
Poor inventory management leads to unmoved stock, a lack of insight into what you have, a mismatch between shopper demand and warehouse supply... ultimately, it's a question of money going down the drain because it's tied up in the wrong items.
On a basic level, what's the purpose of inventory? It comes down to delivering the right product to the customer that ordered it. So in our experience, the goal of inventory management is to make it as easy and as efficient as possible to get that product to that customer.
Bad inventory management is a huge obstacle to achieving that goal. If you don't keep the right products in your inventory, you'll constantly find yourself out of stock of your key items, which leads to delays, backorders, and unhappy customers. And you'll have too many of the wrong things — which means you'll be wasting space (and money) on unwanted items, many of which might expire or depreciate quickly.
Poor inventory management can disrupt warehouse management, too. The less control you have over your inventory, the worse your warehouse will perform. The same is true of accurate data for inventory certainty: discrepancies in-stock can cause costs to spiral, errors to go unnoticed, and data predictions to go haywire.
Basically, inventory management comes down to walking the line between too much and too little. The best way to do that? By knowing exactly what you have, and where it is, at all times.
There are three crucial rules for any warehouse manager when it comes to inventory:
Have enough (don't end up in a backorder situation)
Don't have too much (avoid an overstock situation)
Know your inventory
Now, these rules seem pretty self-evident — but they're not always easy to follow. With a bit of upfront work, though, they are achievable: we've honed them over years of experience at Infoplus.
For Rule 1, the key is planning ahead and predicting trends. In days of yore, customers would have been fine to wait out a backorder of inventory due to high demand. That's no longer acceptable. Now, it's 24-hour delivery or bust. (And there's usually a competitor with a passable alternative available quickly if you're in eCommerce.) So you have two approaches to avoid that sticky situation:
Set up automated low stock notifications, particularly on popular items
Forecast shopping trends with the most accurate data possible to have the right stock on hand
On the other hand, overstocking your inventory isn't great for the reasons we discussed above — it's really just a waste of money that you might never get back. The best approach is to run as close to the low stock line as possible, using the two Rule 1 techniques to avoid drastic consequences.
To make all that work, you need Rule 3: have accurate inventory data. Exactly how much do you have, and what state is it in? What data are you basing trends on? Real-time, comprehensive data is the key to making these rules work for you.
One major mistake is falling on the wrong side of the "amount" tightrope. But many warehouse managers don't consider how processes like labor management and shipping influence your inventory, too.
Okay, let's say you're starting to figure out the whole "how much should I stock" thing. It's time to iron out a few of the other common kinks.
Here's a key one: analytics. Not only do you need real-time, accurate data, but you also need the right type of data — from order velocity to sales-to-inventory ratio.
Another is process mistakes. Are you trying to retrofit your new approach to stock management into an outdated inventory management process, or are you taking advantage of industry-leading tools like barcode scanning to speed up your count cycles? Are you incorporating automation, or are you still using Excel?
Similarly, make sure you're not forgetting about the related facets of your warehouse, like shipping. Inventory is the core that leads to picking, packing, and shipping, so your management process at one end will necessarily affect the other.
The point here is that inventory management upgrades aren't just about the end goal of stock balance or efficiency. They're also about how you get there.
Check out this infographic for a fun, detailed breakdown.
From here, you can take it to the next level. That means revamping areas of your warehouse for unprecedented efficiency or incorporating new tools to truly teach your inventory the meaning of the word managed.
A few options to get you started:
Poor inventory management leads to unmoved stock, a lack of insight into what you have, a mismatch between shopper demand and warehouse supply... ultimately, it's a question of money going down the drain because it's tied up in the wrong items.
On a basic level, what's the purpose of inventory? It comes down to delivering the right product to the customer that ordered it. So in our experience, the goal of inventory management is to make it as easy and as efficient as possible to get that product to that customer.
Bad inventory management is a huge obstacle to achieving that goal. If you don't keep the right products in your inventory, you'll constantly find yourself out of stock of your key items, which leads to delays, backorders, and unhappy customers. And you'll have too many of the wrong things — which means you'll be wasting space (and money) on unwanted items, many of which might expire or depreciate quickly.
Poor inventory management can disrupt warehouse management, too. The less control you have over your inventory, the worse your warehouse will perform. The same is true of accurate data for inventory certainty: discrepancies in-stock can cause costs to spiral, errors to go unnoticed, and data predictions to go haywire.
Basically, inventory management comes down to walking the line between too much and too little. The best way to do that? By knowing exactly what you have, and where it is, at all times.
There are three crucial rules for any warehouse manager when it comes to inventory:
Have enough (don't end up in a backorder situation)
Don't have too much (avoid an overstock situation)
Know your inventory
Now, these rules seem pretty self-evident — but they're not always easy to follow. With a bit of upfront work, though, they are achievable: we've honed them over years of experience at Infoplus.
For Rule 1, the key is planning ahead and predicting trends. In days of yore, customers would have been fine to wait out a backorder of inventory due to high demand. That's no longer acceptable. Now, it's 24-hour delivery or bust. (And there's usually a competitor with a passable alternative available quickly if you're in eCommerce.) So you have two approaches to avoid that sticky situation:
Set up automated low stock notifications, particularly on popular items
Forecast shopping trends with the most accurate data possible to have the right stock on hand
On the other hand, overstocking your inventory isn't great for the reasons we discussed above — it's really just a waste of money that you might never get back. The best approach is to run as close to the low stock line as possible, using the two Rule 1 techniques to avoid drastic consequences.
To make all that work, you need Rule 3: have accurate inventory data. Exactly how much do you have, and what state is it in? What data are you basing trends on? Real-time, comprehensive data is the key to making these rules work for you.
One major mistake is falling on the wrong side of the "amount" tightrope. But many warehouse managers don't consider how processes like labor management and shipping influence your inventory, too.
Okay, let's say you're starting to figure out the whole "how much should I stock" thing. It's time to iron out a few of the other common kinks.
Here's a key one: analytics. Not only do you need real-time, accurate data, but you also need the right type of data — from order velocity to sales-to-inventory ratio.
Another is process mistakes. Are you trying to retrofit your new approach to stock management into an outdated inventory management process, or are you taking advantage of industry-leading tools like barcode scanning to speed up your count cycles? Are you incorporating automation, or are you still using Excel?
Similarly, make sure you're not forgetting about the related facets of your warehouse, like shipping. Inventory is the core that leads to picking, packing, and shipping, so your management process at one end will necessarily affect the other.
The point here is that inventory management upgrades aren't just about the end goal of stock balance or efficiency. They're also about how you get there.
Check out this infographic for a fun, detailed breakdown.
From here, you can take it to the next level. That means revamping areas of your warehouse for unprecedented efficiency or incorporating new tools to truly teach your inventory the meaning of the word managed.
A few options to get you started:
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30% of warehouses are operating efficiently. And US warehouses have trillions in unmoved stock. So dig deeper into our 3 Rules of Inventory in this in-depth resource.
We've covered a wealth of best practices, but one thing we've learned in all our warehouse experience is that inventory is a balancing act of having the right amount of the right things. Your best tool in that right is accurate data about your current stock — then you can get into the details. And inventory is the core of your operations, so it's worth the investment.
