Strategic Logistics: 8 Steps to Controlling Inventory Flow & Driving Warehouse Efficiency

Today's post continues our ongoing series on staying a strategic shipper. We first did an overview of the 10 areas of strategy a shipper must know in order to stay competitive. We then are taking each of those 10 strategic areas and going a bit deeper. Our first post focused on distressed shipments.

Today we will talk about the flow of strategy as pertains to inventory flow and driving warehouse efficiency. Stay tuned over the next few days and beyond for more ways to stay strategic. For inspiration, here are a few great quotes:

 “Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.”

― Sun Tzu

“The essence of strategy is choosing what not to do. ”

― Michael E. Porter

"However beautiful the strategy, you should occasionally look at the results."

― Winston Churchill

"The best CEOs I know are teachers, and at the core of what they teach is strategy."

― Michael Porter

"The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself."

― Peter Drucker

"The purpose of a business is to create a customer."

― Peter Drucker

"Sound strategy starts with having the right goal."

― Michael Porter

Staying Strategic in the Warehouse with Better Inventory Flow

Throughout the entire order fulfillment process, companies have a duty to ensure optimum warehouse efficiency by appropriately controlling inventory flow. Warehouse management rests at the heart of an effective transportation management strategy, and an inefficient, error-laden system results in poor shipping procedures, poor customer satisfaction, and deviations from best practices.

Companies must also consider the potential impact of returns and warehouse capacity. An overstocked warehouse leads to misplaced product in unusual slots and lost costs. Similarly, an understocked warehouse results in delayed shipments, irate customers, and poor company performance.

Every time an item moves in the warehouse, the opportunity for errors exist. Unfortunately, this includes all possible processes, data collection points, and inbound to manufacturing areas. Fortunately, a dedicated transportation management system (TMS) in combination with a warehouse management system (WMS) can reduce, if not eliminate, these errors. Warehouses should also consider implementing these best practices to ensure effective warehouse management and maintain control and flow of inventory.

Automated Data Collection

Some companies believe in the power of a pen and paper in tracking inventory movements. However, the sheer volume of today’s processes in warehouse management have made hand-written tracking procedures obsolescent. The same problem exists with manual entry of information into computers and electronic shipping systems. Although such methods still exist, they can easily misread, misunderstood, or entered incorrectly. As a result, subsequent shipping processes for a specific order become disorganized and inaccurate.

Modern warehouse management demands bar codes or radio frequency identification (RFID) to automatically track and collect data about an item. This eliminates the potential for human errors in transcribing information manually.

When automated data collection emerged, the cost of implementing such technology exceeded the possible losses from human errors. However, automated data collection has become more affordable and cost-effective in the global economy. Automation carries a significant return on investment when a warehouse makes the transition. Initial change will be hard for the warehouse, but it will cut costs and improve overall performance of the facility.

Transaction-Based Movements Inventory Flow

Every movement throughout a warehouse represents a chance to lose track of inventory, cause an error in the order, or result in additional picking errors. Every movement from arrival to slot-placement to picking to wrapping should generate a transaction. Transactions are commonly misunderstood to reflect the sale of merchandise. However, transactions within a warehouse allow for the tracking of a product’s movements and status in the order fulfillment process.

Dock Arrival Times

All merchandise should arrive on the dock at the same time when the truck arrives. This reduces wasted space by sitting product. Furthermore, differing types of shipments, such as full pallets, cases, and individual item shipments, should be sent to the dock simultaneously. 

Picking Procedures

Managing a warehouse to better inventory flow requires predictions and managing orders that have yet to arrive. Pickers, which may be human or robotic, should plan for the next wave of picking. If an upcoming wave will result in picking shortages in one portion of the warehouse, pickers should be diverted from lower-priority picking duties to the surge-area. This will help maintain pickup times and ensure all shipments leave the warehouse at the correct time.

System-Directed Replenishment

As orders move through order fulfillment and picking, the slots will gradually empty. When a given slot falls below standard levels, the WMS should generate an order to the manufacturer. However, this generated order should consider whether a given product will be in high-demand in the coming weeks. This will help account for inventory flow fluctuations and customer-demands decrease and increase throughout the year. The WMS should be designed to generate a reorder of product before the product reaches minimal levels.

Vendor Compliance Programs

While an ideal warehouse would focus on incoming product from one vendor, modern trade involves hundreds, if thousands, of potential vendors. A vendor compliance program allows warehouse managers to ensure all inventory is brought to the facility at the correct time, in the right quantity, and packaged appropriately. Therefore, communication between the vendor and facility, a vital part of advance notification, plays a strong role in ensuring accurate inventory flow and improving efficiency in the warehouse.

For example, a warehouse may hire a vendor compliance manager to ensure all vendors meet the facility’s requirements. Furthermore, this manager would responsible for determining the percentage of vendors who comply with such requirements and suggest improvements to poor-performing vendors.

Returns Management

Returns are an inevitable part of any warehouse management strategy, regardless of efficiency and the implementation of best practices. Customers may decide to return an item due to buyer’s remorse. However, the distribution center (DC) or warehouse sees this as an additional cost.

To maintain efficiency and accurate inventory control, all returns need to be carefully scrutinized for resale value, needed repairs, or return to the manufacturer. As a result, a WMS must account for returns that will be able to be restocked in the appropriate slot.

Flexibility and Evaluation

Errors will happen in warehouse management, and the warehouse team needs to be ready to adapt to changes in processes. This flexibility allows a warehouse to meet changing demands of vendors and customers, which drive all shipping processes. If a problem recurs, the warehouse processes should be re-evaluated to determine if a change in procedure will correct future problems. Maintaining flexibility is critical to meeting demands in the global market.

Making a warehouse improve efficiency and maintain control of inventory flow sounds simple. However, improving warehouse inventory management reflects thousands of individual processes, and every attempt to curtail problems should be considered, implemented, and adjusted throughout the shipping process. By following these eight steps, a warehouse can improve their efficiency and gain more control over their inventory. Inventory Flow Optimization is a vital part of the supply chain, and if not maintained, then transportation is adversely affected. The best-laid transportation management strategies are completely undone with improper inventory management. Only as strong as your weakest link, as they say!

Adam Robinson