Answers to 5 Big Inventory Management Questions
Let’s answer five complex questions related to inventory management. Those questions are:
- How do I manage a warehouse?
- How do I track inventory in multiple locations?
- How do I get the best value for my money with inventory control software?
- What is the best way to manage inventory?
- What results can I expect from using inventory management software?
HOW DO I MANAGE A WAREHOUSE?
This is a big question with several parts that need to be addressed in order to answer it properly. You need to keep a close eye on lead times, optimize your warehouse layout to make picking more efficient, train your workforce on the correct procedures and software, and have the right tools for the job.
Set automatic reorder points on your parts, products, and all other materials in your warehouse, with their lead times in mind. That way, you’ll constantly get new items coming in to replace outgoing ones and keep your inventory levels in equilibrium.
Keep track of your vendors’ performance. Make sure they’re giving you competitive prices and consistently getting the right items to you at the right times.
Use wireless barcode scanners to quickly receive items into your warehouse and keep your inventory records accurate and up to date.
Group products that are often purchased together next to each other, like suntan lotion and beach towels. Put the most popular items closest to the receiving entrance so they’re the quickest to move into and out of your warehouse.
Track inventory by row, shelf, and bin so you always know where to find items when it comes time to pick them.
You don’t need to hire dozens of warehouse workers to manage a warehouse. If you use barcode scanners and warehouse management software, you can keep your warehouse running smoothly with as few as a handful of workers. As long as they’re properly trained on the software and inventory procedures, a small group can get just as much done as a large one, if not more.
The Right Tools
Having the right tools is the key to success in each of the above areas of warehouse management. By automating as many processes as possible, you can do more with less and keep costs down in terms of how much you spend on inventory and how much you spend on your workforce.
HOW DO I TRACK INVENTORY IN MULTIPLE LOCATIONS?
The answer to this question is actually quite simple: Use inventory tracking software. That might seem oversimplified, but the fact is that pretty much everything you need to handle the complexity of multiple locations is found in advanced inventory tracking system.
This software allows you to:
- Check inventory levels at each location.
- Integrate with UPS, FedEx, USPS, and other major couriers to get shipments out the door fast.
- Transfer items from one place to another if one warehouse has a shortage and the other has an excess.
- Monitor long-term trends to see which locations sell more of a certain product and, thus, where more of that product should be stored.
- Ensure shipments arrive at their destinations on time. If a supply chain gets disrupted, you’ll hear about it quickly so you can resolve the problem.
- Use wireless barcode scanners to order, receive, and cycle count inventory in each location.
- Quickly update your inventory data on a per-location basis so you always know where it stands at any given moment.
- Automatically update your accounting records in QuickBooks after transactions are made.
In summary, to track your inventory in multiple locations, all you need is a good inventory tracking solution, some training on how to use it, and some elbow grease to put it into practice.
HOW DO I GET THE BEST VALUE FOR MY MONEY WITH INVENTORY CONTROL SOFTWARE?
Focus not just on what the software costs right now, but how much it will cost to switch to something else in a few years if you outgrow a cheap solution. Make sure it works with your accounting solution and it can even extend the life of QuickBooks and other business software you’re already using.
There are four main ways to answer this question: cost, features, scaling, and integration.
It’s not just the initial price of the software you need to take into account when deciding if it’s the best deal. You also need to add in the cost of software training, support, renewal fees, additional users, and hardware. In the long run, what will the cost-benefit ratio look like? It’s impossible to know the ultimate answer to that question, but try to look out as far as you can.
Inventory control software should give you a variety of features, including the ability to:
- Check inventory levels in real time.
- Cycle count your inventory.
- Track inventory in more than one location.
- Create multilevel bills of materials and work orders.
- Print and scan barcodes.
- Track inventory by serial number, revision number, lot number, expiration date, and more.
Make sure it does everything you need it to do.
You should purchase software that is scalable so it will meet your needs for many years. It’s expensive and a waste of time to have to switch software platforms every few years when you outgrow one’s functionality. All of that extra money and time spent on new software and training would be better put to use if you make the best possible choice the first time and stay with the same software for many years.
Good inventory control software should be able to add multiple-location tracking, advanced manufacturing, and numerous other features to its core functionality. That way, you don’t have to pay for features you don’t need at the start, but they’re easily accessible when you need to make the jump to something more complex.
If you use QuickBooks for your accounting, it’s a good idea to get an inventory control solution that integrates well with it. This will keep your inventory and accounting records accurate so you won’t have to go in at the end of every month and fix discrepancies, like most companies with a manual inventory system do.
You should also be sure the inventory software works with your online shopping cart, if you run an ecommerce website. There’s plenty of other software that companies use, and it works best when each one is connected.
The Best Value
If you keep these four points in mind when searching through inventory control software options, you should be able to make a wise choice and get the most bang for your buck.
WHAT IS THE BEST WAY TO MANAGE INVENTORY?
It all depends. What works for an electronics store wouldn’t exactly work for a grocery store, for example. Decide what you value most, what your budget will allow, what your customers expect, how big or small your business is, and other factors, and that should give you a good idea of the best way to manage your inventory.
There are a number of criteria you can use to answer this question for your particular needs and situation. Let’s answer the following questions as stepping stones to answering the big question:
What Do You Value Most?
In other words, what do you want to get out of your inventory? Some companies want more than anything to keep their inventory processes as simple as possible, others want to make them as fast as possible, and still others want to keep the costs low. Your overall goal has a big effect on how you manage inventory.
If you’re interested in simplicity, you may want to stick with Excel or some system that is easy to learn. If you want speed, you should look into an automated system. If you want inexpensive, you need to weigh the costs and benefits of buying a software solution that could increase efficiency but also cost a bit at the start.
What Is Your Budget?
Companies have to work within their budget. Make sure the inventory solution you come up with works with what you have right now. There are plenty of tools to make your inventory management goals come true, but you can’t use them all, nor should you take a trial-and-error approach to finding what will work.
You’ve got to carefully analyze your needs and do an ROI analysis on any potential solution, whether it’s purchasing inventory management software, staying on Excel, or doing something else.
What Do Your Customers Expect?
Inventory management is simply the means of getting products to your customers. When you look at it that way, your customers’ expectations are what determine your method of inventory management.
Do your customers place huge orders for highly technical products and they don’t expect to get them for weeks? Then you can afford to have long lead times on products, store very little in your warehouse, and save money on the space you don’t need. But if your customers expect products to be on the shelf when they’re looking for them, you need to be quicker and more responsive. Your supply chains need to be quick, you must have a safety stock to avoid shortages, and you need to be mindful of seasonal demand trends.
How Large Is Your Company?
Big companies require more complex inventory management tools than small ones. A small business can make do with an Excel inventory management system or even a paper-based system for a number of years. But when they reach a point where they are unable to track all of their products on a spreadsheet and they need more detailed information on sales, orders, and other parts of their inventory, it’s time to move up to a more sophisticated tool: inventory management software.
If your company is growing rapidly, it’s a good idea to get scalable inventory management software, so it can grow with your business and let you purchase and add new tools when you need them, such as ecommerce, shopping carts, advanced manufacturing, barcode scanning, etc.
Which Inventory System Should You Use?
There are four main ways to approach inventory management. We’ve analyzed them in depth before, so we’ll just mention them briefly again here:
Mix-Max System – When an inventory level falls to a minimum level you reorder so it goes back up to the maximum level.
Two-Bin System – You have a main bin of products that you normally sell from and when it runs out you switch to a backup bin until the main bin is replenished.
ABC Analysis – Organize your products in three buckets: expensive, large ones, moderately expensive medium-sized ones, and inexpensive, small ones.
Order-Cycling System – Periodically do an inventory check (such as once a week) and reorder products that are low.
It All Depends
The best way to manage your inventory depends on the above factors. It’s not a decision that should be made lightly, nor does the one you’ve made have to be permanent. If you’ve tried one system for years, but you’ve either outgrown it or you’ve noticed that it hasn’t produced the results you’ve been looking for, it may be time to try something else.
WHAT RESULTS CAN I EXPECT FROM USING INVENTORY MANAGEMENT SOFTWARE?
Empowered employees, lower costs, faster response times to customers’ orders, improved planning, and optimized warehouse layouts are just a few of the results you can expect to receive when you use inventory management software in your business.
More Empowered Workforce
With barcode scanners and an in-depth knowledge of inventory software, your employees will be able to get a lot more done during their workdays. Instead of having to wait for a dedicated warehouse worker pick items off a shelf or put new products away, they can do those things themselves. Processes that used to take hours can be done in fraction of that time.
With employees getting jobs done quicker and inventory levels getting balanced, your business can expect to cut expenses significantly. Inventory management software saves money by reducing your storage needs, carrying costs, overstocks, and other unnecessary expenses.
Quicker Response Times
When multiple purchase orders come in, you can pick all of them at the same time, find the right containers to package them in, and then alert UPS, FedEx, or another carrier that you have a package waiting for them to pick up. All of this leads to quicker response times. Your customers will get their orders delivered faster and you’ll have a more productive and efficient workplace.
Good inventory management software has the ability to generate reports based on the data it records. For example, if you want to see which products are your top sellers at each of your locations, you can access that information in graphs, charts, and spreadsheets. These reports can help you figure out where you can make the best use of your resources. Seasonal planning, location planning, and many other strategies can be formulated through this data.
You won’t have to hunt through your warehouse to find products. You can access detailed maps showing where everything is by bin and shelf number. Not only that, but you’ll be able to move things around to optimize their placement in the warehouse. If two or more products are usually sold together in the same order, you can move them next to each other in the warehouse to speed up the picking process. You can also put low-selling items farther away from, and high-selling items closer to, the receiving door to decrease the amount of time it takes to put them away and get them ready for shipping.
Expect Big Results
These are some of the biggest results you can expect from using warehouse management system in your business. You don’t have to think about these purely in the abstract, either. Check out real-life examples of companies that have seen dramatic turnarounds in their operations by implementing Fishbowl Manufacturing or Fishbowl Warehouse: Fishbowl Case Studies.