Yes, I Have Inventory. But How do I Manage It?
This is a question we hear all the time. Many of these companies never expected to have large amounts of inventory, but all of sudden they find themselves overwhelmed.
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This can happen to both new and old companies, and is usually related to:
- Start-up companies that expected to drop-ship inventory find they need to bring more inventory in-house to improve customer service and receive better pricing.
- Companies that used a 3PL to handle inventory find they too need to bring inventory in-house to reduce costs and improve customer service.
- Established companies that outsourced manufacturing now need to perform manufacturing in-house to reduce lead times and improve customer service.
- Companies that are expanding their product breadth in order to provide more customer value with a one-stop shopping experience.
Of course, the best time to plan for additional inventory is before it gets into your warehouse. But in reality, the inventory is already there when you realize you have a problem. This problem may surface as slow order process times, unexpected stock outs, obsolesces, or worse - cash flow problems as you have too much inventory that is not moving.
Steps to a Happy, Functioning Warehouse
If that is you, don’t panic. There are steps you can start taking to fix your inventory problems before they turn into a major issue.
- First, you need to sit down and evaluate the value you are providing to your customers against the inventory you are stocking. There are many questions to ask, but the most important question is “Why?”
- Next, you’ll want to determine how your inventory should be organized and stored. There are no text-book instructions for this one, but the key is experience.
- Third, you’ll want to ask “What business processes need to be in place to receive, identity, pick, pack, ship and count my inventory?” A repeatable process is needed in a warehouse to maintain accuracy along with the lowest cost of operations. Handling inventory is a cost, but having inventory that is accurate and shipped to customers in a timely manner is profit.
So what’s the secret?
Experience. Most business owners simply do not have the experience necessary to tackle the above three steps on their own. Since inventory management is not always textbook, where one size fits all, many companies employ a hybrid method of inventory management and warehousing.
When looking for inventory management and warehouse assistance, there are a few factors to look at:
- The consultant should have operational experience with multiple companies similar to yours in type and size. Having a consultant that only has experience with large warehouses may not help you if you run a medium-size warehouse. Similarly, if they only have experience with a big box warehouse and do small order item fulfillments, there might be some gaps to overcome.
- The consultant should know your ERP system. Without this knowledge, they may recommend a process that cannot even be performed in the ERP system without modifications. If they know the ERP system, however, they can suggest an equally effective process that will work without modifications.
- The consultant should know your 3rd Party Solutions. If you plan on using a WMS solution now or in the future, the consultant needs to be knowledgeable of these systems as well to help you determine if these systems are a fit for you company and when they should be employed.
Want to learn more about inventory management?
This post on NetSuite Inventory Management is the first in a four-part guest blog series on NetSuite Best Practices. Our featured guest, George Gulliford, is the Director of Product Management at RF-SMART. With over 30 years of warehouse and logistics experience, George has assisted hundreds of companies in a variety of industries across the globe improve their operations.
Read part two to learn Cycle Counting for Inventory Accuracy, part three to learn To Bin or Not to Bin, and part four to learn Strategies for Retail.
