BETTER WAREHOUSING - INVENTORY MANAGEMENT DESIGN DEVELOPMENT
Simple definitions"
There are five key principles to good inventory warehouse management. Each of these five items are interconnected; meaning the failure of one will damage the accuracy of another.
A warehouse is a planned space for the storage and handling of goods and materials
Warehouse design is so much more that just deciding what to put where. Knowing which items are fast or slow moving, and which are frequently used in combination with others, will allow you to design a facility layout that will meet future demands and or give you the best space optimization per dollar spent.
The approach needed to design a warehouse is similar no matter what the type of inventory controlled (hospital, commercial, industrial).
LOCAL / GLOBAL WAREHOUSING considerations. The local warehouse is typically a space on-site and can be considered a forward-pick location for replenishment in individual areas throughout the facility. Typically a local warehouse has limited space; just enough inventory for 2-4 days. The global warehouse is considered more of a storage (bulk receiving / sortation) location. The global warehouse can offer a means of replenishing the local warehouse. Similar in nature, they both have commonality.
The approach needed to design a warehouse is similar no matter what the type of inventory controlled (hospital, commercial, industrial).LOCAL / GLOBAL WAREHOUSING considerations. The local warehouse is typically a space on-site and can be considered a forward-pick location for replenishment in individual areas throughout the facility. Typically a local warehouse has limited space; just enough inventory for 2-4 days. The global warehouse is considered more of a storage (bulk receiving / sortation) location. The global warehouse can offer a means of replenishing the local warehouse. Similar in nature, they both have commonality.
There are five key principles to good inventory warehouse management. Each of these five items are interconnected; meaning the failure of one will damage the accuracy of another.
- Develop an effective demand forecast policy
- Determine the best warehouse flow first before going into design development phasing
- Place inventory within equipment based on turns (rotation of stock)
- Do cycle counting based on inventory that turns, not those that move slow
- Complete a process "annual" auditing to determine accuracy
Accurate demand forecasting has the highest potential savings to limit an overstock condition. Carrying costs will hurt your facility's profits; therefore, correct forecasting will allow for the right amount of inventory to meet daily, quarterly, and annual demands.
WAREHOUSE FLOW:
The oldest concept within any warehouse design is placement of inventory in the correct spot. Sorting, setting orders, systemic cleaning, standardizing, and sustainability to move materials through your facility logically will reduce manpower and increase savings in operations.
INVENTORY TURNS:
An ABC Analysis should be key to determine the correct turns. A's typically move 80% of the time; where B's move 20%, and C's are considered long-term storage or overages. Once developed, you need to review at least once a year as to stock rotation (many times demands will change where the stock is stored and a revised ABC will be needed). Carrying costs for most companies is around 3%, but can be modified based on the type of inventory.
CYCLE COUNTING:
When stock is considered a slow mover, you only need to count annually for accuracy. Faster moving inventory need to be reviewed monthly to check levels. Max/Mins are to be set for faster moving inventory to ensure and or reduce "stock-outages." Cycle Counting also is very handy to determine if your inventory has found it's way into someone pocket.
PROCESS AUDITING:
Auditing is a function that is typically completed at the end of a year to determine both carrying costs and accuracy of available stock (replenishment needs). Cycle Counting is a proactive task and process auditing is a means of identifying problems areas. The cornerstone principle of inventory management is to audit early and often if required to ensure protection again lost; especially in high dollar volumes.
Only through great design development during design phasing can you achieve success. Allow us to work as a partner to ensure your success. Flow management is JOB-ONE.
Only through great design development during design phasing can you achieve success. Allow us to work as a partner to ensure your success. Flow management is JOB-ONE.
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