Managing Inventory in your warehouses is the underpinning of every wholesale distributor, and it seems like it should be pretty straightforward – right? Wrong, inventory management is very complex, particularly at scale, and needs the right software for wholesale distributors. There are many common inventory mistakes that can make the difference between a wholesale distributor’s business’ success or failure. In this article we discuss these mistakes to avoid and what distributor inventory management and warehouse management software for wholesale distributors can do to help you.
Choosing the right inventory is as much an art as it is a science, and you have to have the correct processes in place to collect the data required to optimize and inform your inventory decisions wisely. Equally important, is the need to categorize and strategically place your inventory in your warehouse. With the tight margins that distributors face, inefficiencies and low productivity can quickly overwhelm your business’ profitability. Today’s technology for distributor inventory management allows you to track and manage inventory accurately and efficiently, by making the right tools, technology, and software available to your employees. Inventory mistakes may be common, but they could cost your business thousands or even millions of dollars.
Common Mistake #1: Making Decisions That Are Not Data-Driven
One of the biggest mistakes made by distributors in inventory management is choosing inventory based on factors other than empirical data, such as hype, novelty, or even personal bias. Imagine, for instance, that you were a distributor of pet products. Because your dog loves one particular brand of rubber chew toys, you decide to purchase and commit a thousand cases of these toys to inventory. Did you ever consider that your dog’s chew toy preference might be an anomaly? Unbeknownst to you, most canines rip through these toys in a matter of minutes, making them an unpopular choice among most other pet owners. In this example, you’d have a warehouse full of rubber chew toys that none of your retailers wanted, all because the decision was made based on personal observation rather than historical or empirical data. To avoid these kinds of situations you need to thoroughly research your inventory purchase decisions, and once you decide what to stock, you need powerful purchasing management software that allows you to evaluate your purchasing decision in real-time. Starting with a trial purchase, then analyzing actual data and forecasting demand will let you avoid the fate of the pet products distributor. Then once you know which products will sell, ensure you stock the right quantities of the right products, avoid stockouts, and eliminate dead or slow-moving products from your inventory.
That is not to say that you should avoid trusting your instincts about bringing in new inventory. But, if you are considering broadening your product line, do not purchase and stock a large quantity of a new item just because a vendor is offering you a deep discount. Purchase, promote, test, evaluate. Try A/B testing your new product with different discounts or different messaging to your own customers. Then, and only then — once you have enough data — should you stock the item. Inventory holding costs are one of a distributors’ largest expenses and should constantly be minimized.
Common Mistake #2: Not Using Wireless Warehouse Management Software for Wholesale Distributors
Along with choosing the right products to stock, distributors must properly track and manage the inventory they carry. There was a time when distributors had to manually print out pick tickets and use these to manage fulfillment. With paper-based processes mistakes happen: the wrong products are picked, and shipped, and picking, packing and shipping processes are very inefficient. Also, as economies of scale dictate larger warehouses, these inefficient manual processes become increasingly disruptive to your core focus on selling, wasteful of resources, and nearly impossible to accomplish with any degree of accuracy. Wouldn’t the amount of time, energy, money, and people hours you put into manual processes be better spent focused on business growth elsewhere? You need modern warehouse management software for wholesale distributors that can automate your ordering and replenishment processes and allow you to streamline order processing, stock level checks, and inventory tracking and replenishment.
Also, the best warehouse management software allows you to use mobile solutions in your warehouse which can dramatically improve speed and improve accuracy. Handheld wireless scanners can greatly improve all your warehouse management processes and picking and put-away in particular. Also, wireless devices can automatically update all statuses so you can quickly see which orders are ready to pick, which are in picking, which are in packing, which were shipped and ready to invoice. Look for a system like Accolent ERP which can accommodate wireless scanners that are either (a) commercial off-the-shelf solutions such as tablets (e.g., Windows Surface, Samsung Galaxy, iPad) in conjunction with a barcode scanner sled attachment or, more commonly, a Bluetooth-enabled hand-held scanner or (b) all-in-one custom hand-held devices. Each approach offers its own merits in terms of cost, mobility, and durability. There are literally hundreds of scanning devices that will work with Accolent ERP's WWMS; we strongly recommend you work closely with your reseller or our contact at Barcodes Inc so you can get the solution that best fits your need.
If you’d like more information about scanner options, please download our scanner fact sheet: Download Scanner Fact Sheet
Common Mistake #3: Placing Items in Sub-Optimal Locations in Your Warehouse
If locating items quickly in your warehouse is difficult or time-consuming, then it doesn’t matter how incredible your products are or how great your inventory management software is. A disorganized warehouse can have many problems: wasted time and labor trying to find products. A, B, and C, and inventory mistakes where products have multiple locations and you’re tracking inventory by location. Just as you should order inventory based on data and analysis, so too, should you organize your warehouse based on it. For instance, if you move product B on a daily basis and in large quantities, then the best place to position that product in your warehouse is somewhere close to the shipping area that’s easily accessible for order pickers, inventory put-away staff and inventory checkers alike. You can also create multiple locations for product B one for bulk quantities and one which you pick from, and track inventory by location. This type of practical approach to organization within a warehouse is known as inventory slotting, and it will make your business more efficient by increasing picking rates, improving the use of space, reducing the distance employees must travel, lowering order processing times, and improving both customer and employee satisfaction. Once you optimize your locations, the best warehouse management software for distributors will let you create picking routes that improve efficiency.
Common Mistake #4: Not Running an Organized Ship
Organizing within the warehouse is similar to slotting, but it’s a more comprehensive way of looking at the warehouse as an organic and dynamic system. Whereas slotting—which is all about strategy—can make your operation more efficient, the proper layout and organization can improve overall flow within the workplace, and thereby increase both productivity and workplace safety. For instance, having a designated and separate space for each SKU can reduce the amount of time it takes employees to locate items within the warehouse. Similarly, having proper signage that directs employees to different areas is also a way to improve organization and keep traffic moving steadily through the warehouse. Having software that supports inventory by location allows you to drill down to the specific aisle, row, and bin locations. Also organizing your cold storage or refrigerated products so they can be picked last in a pick cycle will help cut down on spoilage. Finally, having a place for all things and keeping the space clean will reduce clutter, and this can reduce hazards in the workplace and cut the number of accidents that occur.
Common Mistake #5: Failing to Eliminate Waste Wherever Possible
Since the 1940’s people have continued to talk about lean processes, and the importance of this philosophy still holds true in distribution. First and foremost, in a distribution business, space is money: every square foot in your warehouse is prime real estate, and your shelves should only be occupied by products that are making you money. Items that do not drive profit should be drop-shipped (sometimes called cross-docking) directly from your supplier to your customer, eliminating inventory holding costs.
The problem with dead-weight inventory is three-fold:
- inventory that doesn’t move takes up valuable space
- it prevents you from making room for a more saleable product
- it clutters up your warehouse when your ultimate goal is organization.
However, inventory isn’t the only place where you can eliminate waste, and other areas to focus on include reducing lead times for product sourcing, cutting out unnecessary handling, automating your POs and billing, and optimizing your operation wherever you can.
Common Mistake # 6: Avoiding Regular and Frequent Inventory Checks
There was a time when inventory counting was an arduous, annual process that would shut down a warehouse for days or weeks at a time. But along with many other bygone distribution practices, so too has annual inventory counting gone the way of the dodo. Preferably, a more efficient and accurate way to run inventory is to perform regular inventory checks more often. Even if you can’t allocate employees to do full inventory counts every month, you can cycle through different areas regularly to make sure you’re always staying on top of it. Not only does this prevent you from having to shut down or slow operations every year for the sake of inventory counts, but it also makes it easier to identify and locate discrepancies. The key with this, however, is having the right inventory management software and system in place to track and update your inventory status in real time, because as discussed, outdated or manual tracking won’t do you any favors. When you do inventory counts make sure you're using a wireless warehouse management system for distributors that replaces printed count sheets and manual counting with handheld wireless scanners to improve efficiency and reduce errors.
Inventory mistakes can make or break a distribution operation, especially if several problems happen concurrently in one warehouse, or across multiple locations. The good news is that being aware of the common mistakes that others have made is the first step in avoiding them, followed by implementing changes to inventory ordering, tracking, and organization tactics as necessary. More good news is that there are plenty of technology and software solutions available today that can make your job easier because they can provide you with accurate and real-time data about demand, forecasting, fulfillment, stock levels, and much more. To find out more about how software updates can revolutionize your warehouse and help you avoid common inventory mistakes, contact ADS Solutions today for more information.