Warehouse Operational Efficiency and Inventory Health

Any warehouse operations are measured by service levels, volume of transactions handled quality of transactions and most importantly inventory health maintained.

By Inventory health in a warehouse, we are referring to Physical Inventory Accuracy, the way inventory is physically kept in locations and discipline maintained in transactions, inventory maintained in the system.

Inventory Health, in turn, is dependent upon System setup, floor layout and infrastructure coupled with defined process, compliance, and regular inventory checking, audit and training.

The key to good warehouse operations is reflected in availability of documented process covering all above mentioned functions and documented proof of day to day compliance of above tasks.

All warehouse processes are documented in Standard Operating Procedure, which is the guiding bible. These processes are further broken down to Work Instructions for each job function and task or activity.

Physical Inventory

Warehouse floor will have layout design with designated areas for stocking inbound materials waiting to be in warded, stocking locations with locations marked either in racks, shelves, bins or floor locations to store pallet level, carton level or unit level items and outbound shipment area where materials are removed from inventory locations and kept for consolidation and preparing cargo for outbound shipments.

A good warehouse floor will have clearly marked aisles, locations with labels depicting various kinds of inventory like good stock, stock on hold/ QA, defectives, returns materials, reserve stocks, etc.

The key to inventory health as well as to operational efficiency lies in people following process to keep the right material in the right location, in the right way and updating system transaction to complete the cycle.

Location accuracy is critical to the operations. In a huge operation, materials are picked based on system guided pick lists or RF enabled picking. Any wrong material lying in the location picked may get missed out in the process and end up as wrong shipment or pickers may have to waste a lot of time looking for right part numbers if the location accuracy is not perfect and the lead times cannot be maintained.

System Inventory

Warehouse operations and stocks are driven by Inventory management systems or warehouse management systems. WMS systems manage locations, initiate and control transactions for in warding and outward shipments tasks coupled with inventory management besides interacting with external sources to receive advance shipment notices and to report back on warehouse inventory and transactions.

In all cases system transactions and physical transactions are very closely linked. System always initiates action and tasks that are executed by Physical operations.

Since system is the brain that drives operations and inventory, system inventory and physical inventory needs to be matching perfectly at all times.

Matching system transactions with the physical transaction is a must and very crucial in day to day operations. All system transactions have a bearing on physical transactions and vice versa. Therefore, process adherence to complete transactions is a must.

Taking a simple example, if an operator initiates a change of location of one particular part number for operational purpose and does not update system, the system inventory will show wrong inventory location and not match with physical location. Similarly, if the system initiates any transaction that is not made good on the location will impact stocks adversely.

In ongoing operation thousands of transaction keep taking place in the system and tasks keep getting generated and updated. Even in an RF driven operations scenario, there is always a need to ensure that every system transaction is closed.

Best practices in warehouse operations involve a daily audit of system transaction audit and location accuracy audit on a continuous basis on all shift. System integrity checks are also conducted frequently.

Inventory Audits

Finally a warehouse that gives important to inventory audits as much as to its operations reflects good healthy warehouse operations.

Inventory checking and counting is practiced as a daily activity. Inventory counting teams consist of system operators and shop floor operatives. Inventory counts are normally system driven and stratified where a percentage of locations or Inventory is verified as per list thrown up by the system. In a 4-week cycle or a quarterly cycle, all locations in the warehouse would have been counted, and system throws up inventory discrepancies and transactions that are then resolved by management. Annually wall to wall audits are conducted to count all inventory in the warehouse before starting a new database for New Year.

Besides system driven inventory counts, inventory audits are initiated by operations to verify process compliance and stock/ location accuracy.

Inventory Health is the report card of Every Warehouse reflecting is operational efficiency.

Authorship/Referencing - About the Author(s)

The article is Written and Reviewed by Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.