Effective Inventory Management & Warehouse Design

Effective Warehouse Inventory Management and the Impact of Warehouse Design

When COVID struck the UK in March 2020 and the subsequent lockdown came into force, a multitude of issues was presented within our industry – namely managing the dramatic expedited shift to online consumer purchasing and changing demand for products, as well as serious consideration of the resilience of our distribution networks.

However, despite all the issues the warehouses, distribution centres, retailers and logistics companies have had to tackle, two things stand out as being universal. It’s made everyone review and reassess their supply chains, as well as their routes to market. Since lockdowns have slowly disappeared back into non-existence, there has been a continuation in the online purchasing of our products, making an effective warehouse management system (wms) incredibly important.

For many businesses, this almost instant change in customer demand for their products has had a significant impact on the supply chain and prompted some hasty responses; such as increasing stock-holding capacity in the UK to manage the upsurge of consumer demand, as well as rationalising non-essential product lines.

Now the pandemic has been and gone, for many of our clients, it is now time to consider what their long-term inventory holding strategy should be, and begin to alter their logistics, warehouse inventory management system and supply chain processes to match.

Warehouse Inventory Management Processes and Warehouse Design Fundamentals

Effective inventory management software and processes are crucial for the success of any business. It involves overseeing and controlling the flow of goods in and out of the organisation, ensuring that the right products are available in the right quantities at the right time.

The effective management of inventory begins with a well-designed warehouse. Warehouse design plays a crucial role in optimising operations, streamlining processes, and maximising efficiency in inventory management. Here are some key fundamentals of efficient warehouse design:

Importance of warehouse design in optimising operations

The layout and design of a warehouse space have a significant impact on the overall efficiency and productivity of operations.

An effectively designed warehouse minimises unnecessary movement, reduces labor costs, and improves overall workflow. With a well-designed warehouse, businesses can enhance their inventory management processes and achieve higher levels of operational excellence.

Importance of inventory management in optimising operations

Inventory management can be defined as the process of managing and controlling all aspects of an organisation’s inventory. This includes ordering, storing, tracking, and managing inventory levels to meet customer demand and minimise costs.

The importance of inventory management – and inventory tracking – cannot be overstated as one of the key warehouse management systems that contribute to the overall success of a business. It enables businesses to achieve efficient operations, reduce carrying costs, optimise cash flow, and improve customer satisfaction. Effective inventory management ensures that businesses have the right amount of inventory at the right time, preventing stockouts and excess inventory.

Different Types of Inventory

There are three main types of inventory: raw materials, work in progress (WIP), and finished goods.

Raw materials: These are the basic materials used in production. They are often acquired from suppliers and are transformed into finished goods through various manufacturing processes.

Work in progress (WIP): WIP refers to partially completed goods that are in the production process; these goods have undergone some level of transformation but are not yet finished products ready for sale.
Finished goods: Finished goods are the end products that are ready for sale and distribution to customers, have completed all manufacturing processes and are in their final form.

Key Challenges in Inventory Management

Inventory management comes with its fair share of challenges. Some of the key challenges businesses face include:

Stockouts: Not having enough inventory to meet customer demand, leading to lost sales and dissatisfied customers.
Excess inventory: Holding too much inventory can tie up capital and increase carrying costs.
Inventory obsolescence: Products that become obsolete or expire before they can be sold, leading to losses.
Forecasting inaccuracies: Incorrect demand forecasting can result in either stockouts or excess inventory.
Supply chain management disruptions: Events such as natural disasters or supplier issues can impact the availability of inventory.

Factors influencing warehouse layout and design decisions

Several factors influence the decisions made regarding warehouse layout and design. These factors include the size and type of inventory, the volume of goods being handled, the equipment and technology used, and the flow of materials within the warehouse. By considering these factors, businesses can create a warehouse layout that is tailored to their specific operational needs.

Different warehouse types

There are various types of warehouses, each serving a different purpose in the supply chain. Common types include distribution centres, fulfilment centres, and cross-docking facilities. Distribution centres act as hubs for receiving, storing, and distributing goods to retail stores or customers. Fulfilment centres, on the other hand, focus on fulfilling online orders and delivering goods directly to customers. Cross-docking facilities enable the rapid transfer of goods from inbound to outbound transportation without the need for long-term storage.

Common warehouse design layouts

There are several common warehouse design layouts that businesses can choose from based on their specific requirements. Aisle layout, where inventory is stored on shelves along aisles, is commonly used for small items and in industries such as retail. Bulk layout involves storing large quantities of the same item in one location. Flow-through layout facilitates the smooth flow of goods from receiving to shipping areas, eliminating the need for storage.

We’ve seen a number of different solutions, but common trends include:

• Repositioning inventory to better match your service requirements e.g. holding smaller quantities closer to main markets to improve speed of delivery
• Assessing if holding smaller volumes of inventory is more effective in responding to fast moving shifts in consumer trends
• Considering near-shorting and adjusting inventory planning to ensure product stock is ordered from the supply chain in more frequent, yet smaller quantities
• Using advanced data analytics and modern technologies to improve supply-chain visibility

However, whilst proper warehouse inventory management is being carefully considered, what is equally important and often forgotten, is that changes in inventory management processes must be reflected in warehouse design to ensure that service quality, efficiency and effectiveness are not reduced.

Which is why, in the last few months we at SEC Group have been working with our customers by carrying out in-depth data analysis and modelling with warehouse inventory management software to assess the impact of these changes on their warehouses. We then work to carry out simple changes in order to optimise efficiency and throughput once the new stock-holding strategy comes into effect. In doing so, we’ve successfully managed to ensure that service-levels have been retained or even increased – often through low-cost tweaks to the operations that had not previously been considered.

So, our advice is if you are planning inventory-holding strategy change, make sure that your considerations are holistic and well thought-through. Ensure that any stakeholders affected by the change are aware in advance, and that there is sufficient expertise in place to be able to successfully model and consider the potential ramifications of the changes at an operational level.

Not only will this help further reduce operational risk, but you may well find opportunities to reduce operational costs, or improve service-levels along the way.

Advantages of Implementing Warehouse Automation Systems

There are many advantages to implementing warehouse automation systems. These include reduced labour costs, increased picking accuracy, faster order fulfilment, improved inventory control, and enhanced customer satisfaction. By embracing automation, you can gain a competitive edge in today’s fast-paced business environment.

The role of effective inventory management and warehouse design in business success cannot be overstated. By implementing sound strategies and best practices in these areas, businesses can optimise their operations, reduce costs, and improve customer satisfaction.

Optimising inventory management and warehouse operations requires a proactive approach. By continuously monitoring inventory levels, implementing real-time tracking systems, and analysing performance metrics, businesses can identify areas for improvement and make data-driven decisions. Maintaining effective inventory management and warehouse design is essential for businesses to thrive in today’s competitive landscape – by prioritising these areas and continuously striving for improvement, businesses can streamline their operations, boost profitability, and ultimately achieve long-term success.

Guest Column for Handling & Storage Solutions HSS Guest Column: Effective inventory management and the impact of design