How important is a proper inventory management system and an efficient warehouse?

Let me paint you a picture…

It’s Friday night. It’s been a long, long day in the office and you just want to grab some takeout food and relax. You drive to the restaurant, order your favorite Kung Pao Shrimp, then drive home. You kick off your shoes, grab a plate, open the bag and… Mongolian Beef. No Kung Pao Shrimp – not a shrimp in sight. They gave you the wrong order again.

Your anger can’t hide the fact that the orders should have been checked. Checked twice in fact, by the restaurant and by yourself.

Is it water under the bridge? Can you forgive them? Or are you never going there again and writing a scathing review on TripAdvisor? I’d guess it’s the latter. But those are exactly the decisions your customers will have to make when they open their package from your company and find out its the wrong item.

If your warehouse management system and team isn’t efficient, and incoming inventory is not checked properly, you’re left with too much or too little of what you need to keep your customers satisfied.

Which is why, in this article, I’ll be sharing my thoughts on warehouse efficiency – the problems of a poor inventory receiving system and the simple solutions that will help your organization improve efficiency in the warehouse – without the use of software.

Of course there’s only so much an organization can do these days sans software – inventory management software really can increase efficiency well beyond what is feasible without it. But there are ways to improve things at warehouse level with some quick tweaks.

Why Is Warehouse Efficiency So Important?

You receive your inventory. Your employees are paid to pick, pack and ship it. If the item they send turns out to be wrong they then have to receive the return, and do it all over again! If only we spent a bit more time or were more organized in receiving, we’d be able to chop out all that unnecessary extra work and make our customers happy the first time.

Yes, inventory receiving is one of the most important parts of your organization. It’s the catalyst for whether you will succeed or fail. All your collective efforts and expenses to attract a customer to push the buy button depend on this process.

Wow – it sounds dramatic, but it’s very true.

There are many negatives of bad receiving, but two of the most notable results can be incorrect inventory quantities – which can result in overselling or underselling items – and misplaced inventory, which is one kind of stock that you can’t ship!

If you have incorrect inventory information, whether quantity or identity, you soon know about it. You’ll see:

  • High number of ‘not in stock’ customer orders
  • High number of ‘wrong item’ returns
  • Consistent negative feedback
  • Low return customer rates
  • Low accuracy of inventory counts

So by now it’s clear that inventory receiving is the foundation to the whole operation. With a shaky foundation, the whole organization has the potential to topple.

Your inventory management process is so vital because it affects every part of the chain right up to your valued customers – who will undoubtedly be pissed off as they open the package they’ve waited days for, only to find it’s the wrong item.

If your inventory receiving process is not up to scratch: * Marketing will start to see depressing return customer rates * Customer Service will have to deal with shortsold customers, or those that received the wrong size or item on their order * Marketplace Management will receive the nastygram from eBay or Amazon saying your poor ratings are in jeopardy of delisting your for-sale inventory * Finance will have to deal with paying for inventory invoices they’re not really sure they received * Merchandising will see depressed conversion rates when you have winter boots in odd sizes for sale in summer

Sound familiar? It’s clear that no-one wins. Everyone in your organization is hurt by a poor inventory management system. Now it’s time to sort it out.

The Solution

I’ve painted a grim picture of an inefficient warehouse that should have filled you with the right amount of dread. But it’s not time to worry – the great news is that there are some very simple things you can do right now to turn things around.

I genuinely believe that even the most modest of changes in the outlook retailers take to inventory receiving will increase sales, improve customer satisfaction, and grow returning customer rates.

The solution lies in the heart of the warehouse.

Unlike your creative marketing and social media campaigns, or the groundbreaking company-defining boardroom decisions you make, your inventory receiving will be done daily by what’s likely to be your lowest paid employees, without much thought to the process as they go through the motions.

There’s nothing glamorous about the inventory receiving process. It’s usually carried out in a dusty, poorly lit corner of a warehouse floor, hunched over a cluttered folding table. It’s often executed with dirty hands, maybe with a blunt pencil making chicken scratches on carbon copy paper, printed on a crappy dot-matrix style printer complete with tear off margins.

As I say, nothing glamorous.

And while I won’t ask you to unnecessarily dress-up this process or add glamor where it’s not needed, the rule that precedes the following three on this list is to clean up your act.

That’s right – a well organized, clean and uncluttered work area is crucial. Take a trip to the warehouse and actually watch the receiving process. Is it – as you now suspect – being carried out in semi-darkness on an old pallet, with a pen that’s running out of ink?

If so, it’s time to buy a new desk, a lamp, and some good pens. Actually, forget the pens and invest in a basic, cheap-o computer to be used in the warehouse solely for the receiving process. By using this new computer, there are likely to be a lot less mistakes than by using paper and a telephone.

It sounds simple, but you must instill some pride in the work being done to give this pivotal activity the credit it’s due.

Aside from a clean, organized workplace, there are three key things you can do right now to really revitalize your warehouse efficiency, without using inventory management software. And while you’re not going to actually execute these processes yourself, the direction you give to your managers and employees will be key.

A small disclaimer: every warehouse is unique and not all systems are created equally – but the work to get accurate information is generally the same, regardless of software.

Blind Receiving

You have to think about your inventory holistically – it’s not just about numbers typed in. We’re dealing with physical product here, and have to adjust to suit it. Which is why I advocate blind receiving.

An unbiased inventory count is essential. The receiving team shouldn’t be concerned with how many units of an item there should be on the pallet that enters the warehouse, but rather what is actually there.

This is because – subliminally at least – receivers will use the ‘should’ to influence the count. If they have no idea whether they should be counting 50, 75 or 100 items, they will take extra care to count what is actually on the pallet in front of them.

After counting, a manager can then compare the tally with the actual number ordered, and a recheck can solve any discrepancies.

Another advantage of blind receiving is that over-shipped inventory is more likely to make its way to your warehouse shelf, rather than into the pocket or backpack of an untrustworthy employee who realizes a discrepancy has been made. ‘It looks like 100 have been ordered, but 110 have shown up… ten for me!’

Yeah, these things happen – and blind receiving is a great way to stop it.

Barcode Everything

We’ve established that inventory control is vital to the success of your business, and barcoding is the king of inventory control. I couldn’t fathom a warehouse that operated without barcodes and neither should you.

Barcoding your stock ensures ease and accuracy of moving, counting, and picking the product down the line. It’s reliable and at least 75% faster than manual data entry – even by the most skilled typist. And, by cutting out the middle man, it completely eliminates human error.

It’s essential to know where your inventory is from the moment it enters the warehouse and barcoding is a process that will help you precisely keep track of your stock. It also allows you to know how much stock you have at all times, meaning inventory can be reduced, and warehouse space and overheads decreased.

When receiving inventory, I recommend a short process that your receivers can easily follow: 1. Identify the product 2. Enter the quantity received 3. Assign the current location 4. Generate and apply barcode labels

Simple, but very effective. Take control of your stock.

Use Images

Remember the old saying, ‘a picture paints a thousand words’?

Well it’s very true when it comes to inventory receiving. Unfortunately this is the most overlooked process of the three, but the most important – the holy grail of inventory receiving in fact!

Why? Because the use of images is a surefire way to ensure that your staff are handling the correct items – not just when receiving, but throughout the whole warehouse process.

For example, if your employee sees that Manufacturer Part Number MPN003 is actually blue and not green as the image indicates, this will float the problem to the top immediately, rather than waiting until a customer returns it – by that time you’ve wasted money, time and your reputation.

Incorporating images into your day-to-day receiving and shipping process can be as simple as attaching a print out of relevant images to the receiving or shipping order, so receivers, pickers and packers can see that the correct item is being handled.

More advanced solutions have images in the software for every single item. An easy-to-use interface that displays product images will really help your receiving team accurately match the incoming items with the correct SKU in your catalogue.

Another Solution

By following these three rules and by keeping a clean, organized and uncluttered inventory receiving area, I guarantee your inventory management process will become much more efficient and your business will be a smoother functioning machine. They’re not difficult to implement or train staff to do, and the benefits can be huge.

Of course, adding inventory management software to your organization can bring even bigger benefits and can really set you apart from your competitors, including: * Full Inventory Accountability * Reduced Theft Risk * Sustainable Revenue Growth * Warehouse Process Automation

Your retail operations software should drive processes which allow you to trust your inventory, push your business to the limit and grow the organization.

Intelligent warehouse management software can keep tight tabs on inventory across multiple warehouses and across multiple ‘lots’ or groups of inventory received at different times – even if they were invoiced at different costs.

Retailers with the right warehouse and inventory management tools beat their competition on their ability to scale operations with elasticity, reduce errors and losses associated with manual inventory reconciliation, and grow revenue and profits through operational superiority.

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