Inventory is the bread and butter of a distribution company, and although it may seem like a simple concept, there are many common inventory mistakes that can ruin a wholesale distributor’s business. First of all, choosing the right inventory is as much of 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.
More than that, however, is the need to categorize and strategically place your inventory in your warehouse. Otherwise, inefficiencies and low productivity will prevent you from realizing optimum profits. Furthermore, in today’s digital age, distributors should have a modern system in place for tracking and managing inventory, and that includes having 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. Today we’ll discuss some of the most common mistakes distributors make with inventory, and how you can avoid them.
Inventory Mistake #1: Making Decisions That Aren’t Data-Driven
One of the biggest inventory mistakes that distributors make 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 instance, 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. It’s no surprise that the best way to inform your inventory purchase decisions is to use a reliable inventory management system that allows you to analyze data and forecast demands because this will ensure you stock the right quantities of the right products, avoid stockouts, and eliminate dead or slow-moving products from your inventory.
That’s not to say that you should avoid trusting your instincts about bringing in new inventory. But, if you are considering broadening your product line, don’t 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.
Inventory Mistake #2: Using Manual Methods for Inventory Counts
Along with choosing the right inventory, distributors must properly track and manage the inventory they carry. There was a time when manual tracking (such as using a pen and paper to take manual inventory counts or using primitive software to track it) was commonplace, but those days are long gone thanks to improved technologies and modern inventory management software. Moreover, the size of today’s warehouses makes manual tracking highly inefficient, 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 tracking be better spent focused on business growth elsewhere? All you have to do is update to modern software that can automate your ordering and replenishment processes and allow you to streamline all your operations, including order processing, stock level checks, and inventory tracking. Furthermore, state-of-the-art cloud-based systems allow employees to access the software from anywhere, even if they’re on the road, and these systems are easy to learn.
Using mobile solutions in your warehouse can dramatically speed up and improve the accuracy of your inventory counting processes. Think of the tasks you can re-assign your staff with the time they save by using wireless scanners.
There are two basic approaches that can be used for WMS devices (scanners). The first option involves the use of a tablet (e.g., Windows Surface, Samsung Galaxy, iPad) in conjunction with a barcode scanner sled attachment or, more commonly, a Bluetooth-enabled hand-held scanner.
The second option involves the use of an-all-in-one hand-held unit that is essentially a mobile computing device incorporating a scanner gun and a built-in screen.
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’s WWMS; however, each manufacturer typically sells each device with a choice of operating systems and browsers. Since the device you use to integrate with Accolent’s WWMS module must run a full, standard (not stripped-down) web browser, we strongly recommend you work closely with your reseller or our contact at Barcodes Inc. so you order the right version.
If you’d like more information about scanner options, please download our scanner fact sheet:
Inventory Mistake #3: Placing Items in Sub-Optimal Locations in Your Warehouse
If locating items quickly in your physical warehouse is difficult or time-consuming, then it doesn’t matter how incredible your inventory is or how great your management software is. A disorganized warehouse could be the downfall of an otherwise successful distribution operation because so much time and labor will be wasted trying to find products. A, B, and C. 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 and inventory checkers alike. 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.
Inventory 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 creature. 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. 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.
Inventory 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.Inventory
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.
Inventory 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.
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.