Introduction
Businesses need to streamline their operations and optimize their resources to maintain their customer base and remain relevant in the industry. Warehouse inventory management is an essential aspect of running a customer-based business that optimizes stock levels, reduces wastage and improves cash flow. However, selecting the right warehouse inventory depends on multiple factors like the nature of products, demand fluctuations, storing capacity, budget and so on.
Here is a complete blog on what is warehouse inventory management, criteria for selecting the right inventory management system and unique advantages offered.
What is Warehouse Inventory Management?
Warehouse Inventory Management is the systematic process of managing and optimizing inventory storage and movement. The process includes tracking stock levels and locations to minimise errors and reduce wastage.
Inventory Management vs Warehouse Inventory Management
Inventory Management is a system that ensures a high-level overview of stocks. It includes tracking status, calculating sales trends, profit margins, holding stocks and determining reorder points. The aim is to maintain accurate inventory records for order fulfilment.
Inventory Management tracks stocks across all locations and ensures fulfillment of inventory levels of projected orders.
Warehouse Inventory Management focuses more on the physical movement of goods, storage space and location of stocks within the warehouse. The aim of a warehouse inventory management is to identify cost-saving opportunities and streamline operations. Picking, packing and shipping are crucial processes managed by a warehouse inventory management.
Warehouse Inventory Management simply generates reports on stock status and tracks movement of stocks within a warehouse. This system establishes guidelines for picking and packing processes. It also provides step-by-step instructions for complete accuracy.
Criteria For Selecting the Best Inventory Control Methods for Warehouse Inventory Management
- Nature of Product
The nature of the product entails the shelf life of the product. The life, quality and storage requirements are also included in it. For instance, inventory for seasonal products need to be maintained in a certain manner to prevent deterioration.
- Demand Trends
Demand trends or demand forecasting is used to plan the inventory based on customer needs and preferences. Certain products are seasonal in nature, therefore, inventory needs to be updated accordingly.
- Stocking Capacity
Stocking capacity includes the warehouse space and ways in which storage can be optimised. Therefore, businesses must ensure that stock and space are in congruence with each other.
- Budget
Operational costs are a must to be considered vis-a-vis operational efficiency. Budget includes everything from purchasing and transportation to holding costs.
- Supplier Relations
Supplier relationships are essential to enable proper inventory replenishment. Establishing cordial relationships with suppliers requires clear communication channels for clarity.
- Scale of Operations
The scale of operations means methods to store and deliver products must match the complexity and size of the warehouse operations.
7 Best Warehouse Inventory Control Methods and Techniques
Here is a list of 7 foolproof warehouse inventory control methods and techniques to run operations smoothly:
- ABC Analysis
This analysis identifies the value of the inventory based on the popularity of products. The stock of fast-moving consumer items is maintained by grouping them under A (most valuable), B (second level of importance) and C (least in demand or value) categories.
- Perpetual Inventory Management
To maintain constant or round-the-clock visibility over inventory levels, perpetual inventory management technique is used. The inventory is counted as it arrives with the help of radio-frequency identification and point-of-sales system.
- Economic Order Quantity (EOQ)
EOQ determines the optimal level of goods to be ordered to meet the demands of customers and minimise inventory costs. Cost of holding and ordering inventory are calculated and shortage costs, holding costs and order costs are also considered.
- Safety Stock Inventory
Safety Stock Inventory management is a technique to meet customer demands more promptly and maintain additional goods. This technique is most effective when there is a supply chain disruption or unexpected demand fluctuations.
- Batch Tracking
Tracking defective items and keeping a check on expiration dates ensures quality control and allows for meeting regulatory requirements. Pharmaceutical companies, food industry and the cosmetics industry opt for this inventory management technique as keeping a track of production and expiration dates is crucial.
- FIFO and LIFO
FIFO stands for First In, First Out. This management technique ensures that older inventory is sold prior to the rest. LIFO stands for Last In, First Out. With this technique, the latest inventory is sold before the first. While FIFO ensures that the inventory stays fresh for long, LIFO ensures tax savings by increasing the cost of goods sold.
- Just In Time Inventory
Just-In-Time Inventory is an inventory management technique according to which untold inventory or dead stock is avoided. Items are ordered and received when needed i.e, a supplier delivers inventory to the warehouse when a customer places an order.
Conclusion
Warehouse inventory management supports sustainable growth of businesses and creates a smooth workflow. Selecting the right inventory control depends on a number of factors like the nature of the business, budget, demands and so on. Whether it is a traditional warehouse inventory management technique or the latest one, it must align with the business objectives properly. This will ensure that your business builds a reliable reputation and stays competitive in its respective dynamic industry.
Frequently Asked Questions (FAQs)
Q. 1 What are the 5S in a warehouse?
Answer: The 5S in a warehouse are sort, set, shine, standardize and sustain. The aim is to create a systematic structure that is easily scalable and easy to adapt.
Q. 2 What are the 4 steps of inventory management?
Answer: The 4 steps of inventory management are assessing what is in stock at the moment; reviewing what was included in the inventory; analysing sales and identifying items that need to be repurchased or discarded.
Q. 3 How is the inventory calculated?
Answer: To calculate an inventory, add the beginning inventory to the ending inventory and divide this total by the number of periods. This simple formula allows efficient stock management and streamlines operations.
Q. 4 What are the most commonly adopted inventory management techniques?
Answer: The four most common inventory management techniques are materials requirement planning, days sales of inventory, economic order quantity and just-in-time management.
Q. 5 What is a Reorder Point?
Answer: The Reorder Point is that inventory level at which a new order must be placed to prevent running out of stock. It is calculated by multiplying the lead time (or days) with the daily demand for a product. The aim is to ensure uninterrupted operations on a daily basis.
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