Jay LeonardAn effectively managed warehouse is the key to a successful company because the on-hand inventory of the company may be its largest expense and its largest asset.
Inventory coming in to be stocked in the warehouse or going out to a customer must be traceable and accounted for at all times. Procedures must be in place and management must see to it that they are diligently followed in order to minimize errors.
If a warehouse manager starts to experience problems with inventory counts and misplaced product, the problem can be found in any one of these five areas:
- Inaccurate receipts and purchase orders
- Lack of communication between employees
- Lack of cooperation between departments
- Time management
- Warehouse space and organization
When there is a breakdown in any of these points, inventory can be misplaced or lost altogether and, as a direct result, customer satisfaction and trust will be compromised. There must be checkpoints, checklists, processes and rules in place in the warehouse to ensure the right product is coming in, stored in the right spot, pulled for the right customer and shipped to the right address.
Whether a company uses either an automated or manual inventory tracking system for receiving and shipping, it is critical that the information provided be checked and verified as correct.
It always comes down to the details. The supplier’s receipts must match the product received and the purchase order must have the right item code, unit of measure quantity and delivery information.
If the error originated in another department, it has to be found and fixed by the warehouse personnel before the product is shelved or shipped. Every individual in the warehouse has to be held accountable for accuracy. The management staff has to be involved and available to ensure that procedures are being followed.
Accountability is the best way to prevent errors with the details.
When the employees of interacting departments communicate with each other fewer mistakes are made. Sometimes they even catch a potential mistake before it happens. If the ordering department tells the warehouse about a change in an item ordered or a change in the delivery date, problems are avoided.
When there is not good communication and a problem presents itself, everyone, including the customer, becomes aggravated and blames everyone else involved.
Because there are so many methods of communicating: texting, emailing, calling on the phone, faxing or the old fashioned way of walking from one department to another and talking to someone, there is no excuse for failure to communicate. Having a rigorous communication workflow is paramount.
The warehouse employees are especially compelled to communicate with each other because of the constant influx and output of inventory.
Managing a warehouse requires cooperation from other departments within the company. The biggest problem for the warehouse manager is when employees from the other departments improperly remove stock items from or return stock items to the warehouse.
Keeping reliable stock records is a daunting task when movement is not recorded. Not only does it cause problems for the warehouse but it also causes problems for the procurement department.
One possible solution to unauthorized removals or returns is to limit personnel access to the warehouse.
Most reputable 3PL warehouse have robust inventory controls systems and employee tracking with different levels of authorizations to secured areas of the warehouse floor so that accountability can be enforced if things ever go amiss.
Place a lock on the door and allow only warehouse employees to be there. Another way to discourage non-warehouse personnel from making unauthorized and undocumented movement transactions is to invite them to participate in a cycle count.
If you were to ask a warehouse employee what is the most important function in the warehouse he would probably say that it is shipping the product to the customer. He knows that if the product doesn’t ship the company doesn’t get paid; however, receiving is even more important than shipping. The problem is is that most warehouses employees spend more time on shipping than receiving.
The supply chain can start with the production department within the company or the materials can come in from an outside source.
Either way it is critical that all of the information on the receipt be accurate and verified.
- Are the item codes and units of measure correct?
- Has the inventory been physically counted to verify quantity and determine that it is free from damage?
- Has the product been moved to the correct storage location?
One way to prevent errors and eventual problems is to have a checklist for each stage of the receiving process. It takes well-planned time management to add extra steps to the process but if the warehouse manager enforces the process the system will run smoothly and efficiently.
Finally, let’s talk about warehouse organization and slot appropriation:
Each and every countable inventory item has to have its own identifiable storage location. It cannot be stressed enough how important it is that all stock be stored in its rightful place.
How many times has someone picked up an item from one isle in the grocery store, changed their mind, and then put it back on a shelf in a completely different isle?
That one action by one person multiplied by ten people each day is enough to possibly increase purchasing costs due to misplaced and miscounted product. The solutions to this problem are regularly scheduled cycle counts and diligent and observant management staff. When they are walking through the warehouse they have to always be looking for out-of-place stock.
Receiving and shipping goods are considered by some to be two of the most important functions in a company. By having an exceptional warehouse management staff that oversees the daily operations and makes sure procedures are adhered to, warehouse problems can be minimized, costs can be decreased, profits can be increased, and most importantly, customers will be happy and want to return for more business.
Read more: Five Tips For A Successful Warehouse
This article was written for Business 2 Community by Jay Leonard.
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I found your article very good as an introductory for those who want to get to the most common root causes of issues of inventory management. However, there are distinct differences between manufacturing operations and central distribution operations just like there are distinct similarities. I would like to hear your thoughts on the distinct differences since the article is generally applicable to manufacturing inventories versus distribution inventories. I know the saying, “parts are parts,” but I’ve always felt that was a cop-out and way to brush the issues off. For instance, distribution warehouses of a much higher product mix and much wider variance in demand from small to large customers. These distinctions need to be addressed according to size, turn-over and minimizing mean free path of travel for the product and inventory. I’m not expert PHd in the subject but I’ve been in a lot of manufacturing plants for many manufacturing industries and have been recently adding distribution centers.
Forgive my lengthy comment but I desperate to boil down the root causes of such distribution operations to the most common and costly issues and the easiest low tech solutions. I’m not interested in automated robotic warehouse systems of the future. I’m living in the here and need to help customers make significant changes in their business without disrupting their shipping schedules. Tiny low tech or non-tech baby steps versus overhauls is what I’m looking for out there in the world of best practices.
Also, stories of rags-to-riches operations where a distribution center started as a mess and then gradually over the a year or two through training and education turned the tables and became the pearl of the industry. I’m talking about American based centers not Asian, Indian, or South American.
If we are hoping for a renaissance of USA manufacturing and distribution then we have to NOT pick up were we left off (NAFTA time frame) and leap frog to a newer level. I’m talking from the top down of the organization to the culture of is members down to the dock worker and truck driver.
I’m open to any technical text references that rise to the top of realization versus theory. I’ll let Microsoft, Intel, HP, Cisco, Amazon and walmart figure out the systems of tomorrow. That won’t help those in need today.
Sincerely, & Respectfully,
Nate Chandler
Mechanical Engineer, PM & Supply Chain Engineer