How can you improve inventory accuracy through better product classification?

1 What is product classification?

Product classification is the process of grouping products into categories based on their characteristics, such as size, shape, weight, color, material, function, or demand. Product classification can help you simplify your inventory management, as you can assign different storage locations, picking methods, and replenishment strategies to each product category. For example, you can store fast-moving products near the shipping area, use barcode scanners for small products, and apply cycle counting for high-value products.

2 Why is product classification important?

Product classification is important for improving inventory accuracy, as it can help you reduce errors, optimize space, and increase visibility. By using product classification, you can reduce errors such as mislabeling, misplacing, or miscounting products, as you can easily identify and verify each product category. You can also optimize space by storing products according to their size and demand, which can prevent overstocking or understocking issues. Additionally, you can increase visibility by tracking the inventory levels and movements of each product category, which can help you make better decisions and forecasts.

3 How to implement product classification?

Implementing product classification requires analyzing your product portfolio and identifying the key characteristics that differentiate them, such as SKU number, product name, description, dimensions, weight, price, or sales volume. Then, create product categories based on these characteristics using a hierarchical or flat structure. Assign storage locations, picking methods, and replenishment strategies to each product category according to factors such as size, shape, weight, demand, or value. Automate and monitor these processes with tools like warehouse management systems (WMS) or inventory management software (IMS). Finally, review and update your product classification regularly based on changes in your product portfolio, customer preferences, or market conditions. Training staff on how to use and follow the system is also essential.

Product classification can help you organize and track inventory more efficiently and effectively. However, it is not a one-time task but a continuous process that must be monitored for accuracy.

4 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?