LPCP Module Introduction #5: Warehouse Inventory Control & Audit
Updated: Jun 19
Although the terms inventory management and warehouse management appear to refer to the same type of materials management in industry, in reality there are subtle differences between the two. Understanding the differences can be important for company managers and owners to realize, because the type of materials management system you use to catalog your inventory depends upon various factors that can affect the efficiency of your business. Benefits Of Warehousing
A centralized location is important to business operations. Centralized locations make it easy to receive, prepare and ship products to consumers. For one company, a warehouse near the shipping docs is imperative for receiving goods from suppliers. For another company, a centralized location is a central hub in the middle of the city, where deliveries are made promptly to any part of the city and outlying communities. Business owners have to consider the costs of central locations and may decide to adjust the location to save money while remaining as close to the desired hub location as possible.
Better Service Implementation When your buyers put in an order, they aren't concerned with your potential fulfillment issues. They want the product to arrive in the desired time frame. Warehousing ensures you can do this with "security stocking." Having enough stock to handle the normal supply needs for this month and next month means you can fulfill orders even if your suppliers are delayed or incoming inventories are lost or damaged. You still need to address the issue with your supplier but not at the expense of losing a sale or a long-term client because you couldn't fulfill the order.
Value-Added Delivery Component Maintaining inventory in the warehouse adds value to the customer experience. Warehouse staff can check product stock and let customers know what is immediately available. If orders contain components that require shipment assembly, the process is much quicker when inventory is on hand, meaning the customer gets the products faster. This is a major benefit to the company. Think about a home improvement store that doesn't have an adequate stock of materials. The store loses customers to the one that has the inventory.
Scaled or Seasonal Growth Warehousing allows for economies of scale, which means the business can scale operations up without a significant increase in costs. Business owners can monitor buyer trends and stock up on inventories for certain buying cycles such as peak holiday season. The ability to scale operations as needed without increasing costs by much allows the business to take advantage of sales cycles and new opportunities in new markets. Whether you stock goods for sale or supplies to run your business, controlling your inventory can improve your bottom line. Inventory can be one of your largest expenses, right behind payroll. If you make sure you only store what you need when you need it, you can keep more of your cash for investing in your business growing it. No matter what warehousing and inventory system you use, it should accomplish some basic functions. Benefits Of Controlling Inventory
Incoming Quality Control You need to be able to inspect the quality of shipments when they come in and reinspect them when they are stored and retrieved. Your warehouse management system should provide you with an inspection area for when shipments arrive. Inventory personnel can inspect the shipment for damage and make sure it contains the items ordered. Once the stock is stored, you should be able to access it easily to look for damage and to check expiration dates, if applicable. This process can be repeated when employees retrieve inventory. These processes allow you to ensure the quality of your inventory so you can use it for its intended purpose.
Tracking Losses You can account for damage and losses with a good inventory system. You need to not only identify damage, you also need to place a value on the unusable item. Inventory pieces can have different values depending on when you ordered them, so your labelling and tracking should tell you exactly how much you paid for each unit. Then you can show the exact expense of any loss. Use this figure when calculating your net income. Your inventory losses count as an expense of doing business.
Timing Purchases You may think it's time to reorder inventory when, in fact, you have the items already in stock. Knowing where units are located can prevent double ordering. If your warehouse personnel simply put new items in the first available space and don't make note of the storage location, you may not realize what you have on hand.
Retrieval and Order Filling When you need your inventory, staff must be able to retrieve it quickly and efficiently. The less time a stock picker spends looking for an item, the less you pay in wages for retrieval. Also, timely filling of orders can improve your customer service. After all, the purpose of storing inventory is to have it readily available. If your warehousing system interferes with that availability, you are defeating the purpose for warehousing your stock.
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