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How to Manage Inventory Effectively With 5 Steps Warehouses Should Follow

Posted: August 08, 2019 by Ly Phan

How to Manage Inventory Effectively With 5 Steps Warehouses Should Follow

Taking a central role in the supply chain, warehouses serve as critical processing points for millions of products every day. Therefore, the question of how to manage inventory effectively is an essential one, from the moment it arrives at the moment it leaves. The aim is to be able to maintain a healthy flow of products, minimizing the amount of time they spend on shelves and getting them to the end-user as quickly as possible.

The role of warehouses and distribution centers is to not only ensure a quick flow of inventory but also to maintain accuracy.  By combining technology with best practices, 99% accuracy is within reach. In this post, we set out how your business can step up its game and fully utilize the advantages of inventory management. 


Organize the Floorplan

Warehouse space utilization can pay significant dividends.

Robust inventory management begins with maximizing warehouse space utilization. This is a critical component for successful warehouses and distribution centers because it’s the foundation of smooth-running operations. By reviewing the layout, product placement, and traffic flows, you will be able to identify areas for improvement on how to manage inventory effectively. 

For instance, placing the heaviest and in-demand inventory near the exit points will help save workers time and resources. Additionally, you could identify items that are often bought together, like electrical goods and batteries. Smart product placement can reduce picking time by up to 17.34%, which leads to a significant increase in efficiency.

The aim is to make marginal gains in terms of time and resources, which can accumulate to significant savings over the year. As mentioned earlier, optimized warehouse space utilization can help achieve the ultimate goal of maximum efficiency.


Track Inventory

An organized foundation leads to easier tracking of products as they go through your warehouse or distribution center. In doing so, your business would be able to stay on top of inventory control

For example, using a barcode system is an effective way to monitor stock levels and track inventory in real-time. It reduces the risk of items going missing, stockouts, and enables businesses to process product returns efficiently. With online retailers reporting an average 30% return rate, distribution centers face a challenge in handling return logistics. 

Without a proper system in place, returned items can easily be misplaced or lost. For example, some products need to be repaired, while others can go straight back to the market. Categorizing these items quickly and efficiently is critical for customer satisfaction. Distribution centers must have the capacity to handle this growing trend and be able to comprehensively track product returns. 

As well as reducing costs, tracking inventory can lead to opportunities to proactively grow revenue. With a system in place, you would be able to identify purchasing patterns and order fulfillment times. Using a barcode system can enable businesses to reduce lead times and ensure they have the most profitable inventory in stock.


Embrace Efficient Picking Techniques

Another aspect of inventory management is picking and packing logistics. There are three main techniques you can choose from:


  1. Piece Picking: Small businesses often opt for this technique, which is to fulfill each individual order as they come in. The appeal lies in its simplicity, and for smaller warehouses, it works. However, if the number of orders grows, piece picking becomes time-consuming and ineffective.
  2. Batch Picking: Follows the same method as piece picking, but the difference is that individual orders are fulfilled in batches. This makes for more effective use of worker's time and resources.
  3. Wave Picking: For the larger warehouses, or those looking to grow, wave picking is the most efficient technique. This involves splitting workers into teams to pick from their designated areas and place onto a conveyer belt to be packed at a later stage.
  4. Cross-docking: This describes the technique where items are loaded straight onto trucks as soon as they are delivered. It dramatically reduces handling and storage time, which can provide a seamless flow of products. However, such an approach is not always attainable for every situation. For instance, e-commerce fulfillment centers require the stock to be ready to be delivered ahead of time.


The idea is to limit the number of times the inventory is touched during the time it is in the warehouse or distribution center. As with warehouse space utilization, using the right technique for your business reduces the time it takes to pick items and increase productivity. Therefore, design and work with a system that ensures the most efficient flow possible in a way that suits your requirements.


Implement Inventory Management Software

Inventory management software covers all the bases for warehouse businesses.

Small to medium businesses with warehouses are increasingly turning to SaaS-based inventory management software as a solution. This cloud-based option is affordable, flexible, and easy to implement without the hassle that comes with on-premise hardware. 

The secret to the success of inventory management software is automation. The ability to track information in real-time, that can be securely accessed from anywhere in the world, has proved invaluable for Frozen Gourmet, a wholesale food distributor based in California. The company implemented Smartturn’s solution and has enjoyed stellar results:


  1. Sustained double-digit growth using centralized, on-demand software
  2. Reduced stock-outs
  3. Gained deeper visibility into real-time inventory to cut costs
  4. Integrated purchasing and shipping into inventory management


By working with Smartturn, Frozen Gourmet was quickly able to identify areas for improvement and use the software to implement the required changes. The result was a streamlined, automated system, which increased profits and spurred the company’s double-digit growth.


Engage With Your Staff

A critical aspect to the success of any business is the staff. Even the best ideas, systems, and technology need people to make it work. Engaging with your teams is essential, particularly with any changes to working practices. This process should be a continual one - after all, it is the staff who are working on the floor day in, day out.

Studies have shown that engaging with employees leads not only to a 22% increase in profitability but a 48% decrease in safety incidents. With those benefits in mind, businesses should ensure clear lines of communication, where workers can reach out to their managers and vice versa. The managers should then be able to provide feedback to the senior leadership team, who will then be able to track the performance of the business.

The idea is to give the decision-makers a clear overview of the business, identify areas of weakness, and to find the best solutions possible. This process is then reversed when those changes are made. The next step is to ensure the staff are appropriately trained to utilize any new technology or method of working fully. In essence, it should be a two-way process.


Conclusion - Be Proactive

The common denominator in this post is proactivity. Inventory is the lifeblood of warehouses and distribution centers. Without proper care and attention, the processes which keep the items flowing around the supply chain could breakdown - leading to low productivity and dissatisfied customers. 

By taking a proactive approach to all aspects of inventory management, you will be able to keep the products moving as efficiently as possible. The key is to continually review performance and evolve - rather than making costly and inefficient sweeping changes. This real-time analytics is made much easier with SaaS-based inventory control solutions.

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