ADS Solutions Wholesale Distribution Software Blog


Common Inventory Mistakes Distributors Make

common inventory mistakesInventory 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

cross docking invetorySince 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:

  1. inventory that doesn’t move takes up valuable space
  2. it prevents you from making room for a more saleable product
  3. 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.


7 Tips for Cross-Docking

7 tips for cross-docking
Cross-docking has a double meaning in the supply chain, so before we launch into these 7 tips for cross-docking, it’s important to understand the difference. For some, cross-docking involves organizing one’s warehouse to support the immediate receiving, sorting, and, if necessary, quick re-packaging of shipments from suppliers, then their nearly immediate release to customers, without ever storing the goods in inventory. For others, cross-docking is a misused but more common term that is synonymous with drop-shipping. Drop shipping is the process a retailer or distributor uses when they take an order from a customer for an item they do not regularly stock or that is currently out of stock, and simultaneously process a purchase order from their supplier (often the manufacturer), requesting the supplier to ship the item directly to the purchaser. The purchaser — a business or individual consumer — pays the retailer or distributor directly for the product and sometimes does not know, nor do they care, that the item never resided on the retailer’s or distributor’s shelf. The definition of cross-docking explored in this article will focus on the latter example where the distributor is the JIT conduit between the purchaser and supplier.

Benefits of Cross Docking

There are many cost- and time-saving benefits of cross-docking. Fundamentally, cross-docking alleviates the need for inventorying and warehousing products. When done right, cross-docking:

  • reduces labor costs
  • eliminates inventory holding costs
  • frees up working capital and warehouse space
  • reduces delivery time and transportation cost
  • lowers warehouse expense because less square footage is needed
  • savings from cross docking can be passed onto customers, allowing distributors to retain and acquire new customers by pricing more competitively
  • fewer ‘touches’ mean less risk of handling damage which translates to fewer returns and happier customers

Simply put, cross docking saves time and money while improving customer satisfaction.

Clearly, there are many advantages to this JIT or “no-inventory” model, but there are also potential problems, as well. With that in mind, here are seven great tips for cross-docking that will help you reap the most reward from the practice, while also avoiding the common pitfalls.

Tips for Cross-Docking

1. Choose Products Most Appropriate for Cross-Docking

The first rule of cross-docking is choosing the products that are the best candidates for the practice. First and foremost, some of the best choices for cross-docking are items that have a stable and constant demand. Other great candidates are products that are consumer-ready, in the sense that they’re already packaged, bar-coded, and ready for sale. Furthermore, oversized, heavy, and difficult or expensive to ship items (think large home appliances, for instance) make good cross-docking products. Finally, definitely consider cross-docking products when the cost of a stockout is high. Other good candidates include:

  • Pre-inspected products that don’t require quality control on your end
  • Perishable goods
  • Promotional or seasonal items
  • Newly launched products whose future demand is difficult to quantify

2. Choose the Right Kind of Cross-Docking for Your Needs

There are actually a number of different ways to cross-dock products, and it all depends on what you do, who your customers are, and who your suppliers are. For instance, if you’re a distributor, you may have customers ask you to have product cross-docked to them directly from the manufacturer. On the other hand, you may be the one drop shipping directly to an end customer on behalf of a retailer. Depending on the type or types of cross-docking you choose to engage in, you’ll have to have different policies and rules in place to address the different scenarios. Spend some time defining and communicating your returns policies to your customers.

3. Consider Offering a Wider Selection of Products to Offset Lower Margins

For distributors who have product cross-docked from the manufacturer directly to their customers, one of the major downsides of cross-docking is a lower margin on products, because manufacturers often charge a convenience fee. However, because you don’t have to pay upfront for inventory that’s cross-docked, it means you use that working capital to offer a wider range of products. For instance, say you’re a distributor of household appliances. Instead of offering just refrigerators to your customers because you have to pay upfront to inventory them, you can have your refrigerators cross-docked directly from the manufacturer which frees up capital you can use to inventory and sell water heaters as well. In the end, although you end up with lower margins on the refrigerators, you have a larger product line, appeal to a wider customer base, and have more opportunities to make a profit.

4. Have a Solid Plan in Place to Track Cross-Docked Inventory

Another potential drawback of cross-docking is that you have less control over the inventory, and if you want to keep your customers happy, then it’s essential that you have measures in place to track products and orders. This can work in both ways: either the manufacturer is shipping directly to your customers, and the inventory never even enters your warehouse, or you’re drop shipping directly to customers, and the inventory involved goes through different channels than your regular product line. In either case, it’s necessary to have a strategy in place that allows you to keep a close eye on your orders, your inventory, and your fulfillments. The best way to do this is with inventory management and tracking software, which can help you keep an eye on where products are, where they’re going, and when they arrive.

5. Choose Your Partners Wisely

Because of the lack of control during cross-docking, it’s important that you choose partners that you trust. Just as you want to have sturdier measures in place to track cross-docked product, so too, you want to carefully vet the manufacturers that you have drop-ship for you or the retailers that you drop-ship for. The main reason for this is that you are ultimately the one responsible for making sure that product gets where it needs to go, and customer dissatisfaction can seriously damage your reputation if you choose the wrong partners. For instance, say that you ask a manufacturer drop-ship a refrigerator to one of your customers. You’re relying on that partner not only to ship the item but also to ship the right item to the right customer, on time. That’s a lot of trust you’re putting into another business partner, and a vetting process will help you choose our partners wisely. Similarly, if you’re cross-docking on behalf of a retailer, you’re trusting that retailer to provide you with all the right information to ensure you get the right product to the right customer, on time. All of this requires business software capable of tracking cross-docked or drop-shipped items.

6. Have a Clear Policy in Place with All Partners Involved

Part and parcel with choosing the right partners is making sure you have a policy laid out so that all parties involved understand their rights and responsibilities. There are many different points along the way where cross-docking can go wrong, and a solid policy will help to avoid issues such as:

  • Who deals with returns and how they’re managed
  • Who takes responsibility for lost shipments
  • How shipping costs are calculated and paid for, and by whom
  • How backorders are handled
  • How tracking numbers and order information are shared
  • How partners communicate with each other regarding inventory availability and stock-outs

7. Make Sure the Policy Is Clear for Customers, Too

Aside from profit, customer satisfaction is the main goal that you must keep in mind when making any business decision, because if the customer isn’t happy, then your business isn’t happy and won’t grow. And whether your customer is the retailer (where the manufacturer drop ships) or the end consumer, then you must ensure that your cross-docking policies are clearly laid out and understandable for the customer. Otherwise, this could lead to confusion and disappointment, and possibly a returned product, lost sales, and a bad reputation for your business.

Cross-docking can be a great way for businesses to sell products without having to spend time and money inventorying and warehousing them, but the practice must be done properly if you want to gain the most benefit. The key points to remember about cross-docking are that you have to choose the right products and the right type of cross-docking for your needs, and you must have clear strategies and policies in place to track and manage orders and expectations. Finally, your policies and strategies must be clear to all parties involved, including suppliers, retailers, and end consumers, because this is the only way to ensure that cross-docking will work for everybody and that your customers will be happy with the process. For more information about how ADS Solutions can facilitate cross-docking for your company, contact us today. We’d be happy to review your current cross-docking procedures and discuss whether our software can help your distribution business.