Strong warehouse inventory management can mean the difference between your business making and losing money. In this article, learn best practices and tips from leading experts on improving your inventory management accuracy and efficiency.

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What Is Warehouse Inventory Management?

Warehouse inventory management is the process businesses use to organize, track and handle goods in their warehouses. These goods can include raw materials, finished products and items in production.

Manufacturers, wholesalers, distributors, retailers and ecommerce sellers need powerful warehouse inventory management to satisfy customers and fuel growth. Inventory often counts among the most valuable physical assets on a company’s balance sheet and represents a significant commitment of working capital.

An accepted rule of thumb is that 90% of inventory is stationary at any given time, with the remainder in transit.

Warehouse inventory management deals with goods held in warehouses and distribution centers. Some warehouse management systems can also cover inventory in stockrooms or on store shelves. Products in transit are also technically part of your inventory from a legal and accounting perspective if the terms of sale dictate that ownership transfers on delivery, but these are not always part of warehouse inventory management systems.

Effective warehouse inventory management ensures accuracy and efficiency in order picking and packing, counting inventory quantities and locations and projections of how much inventory you’ll need in the future. Essentially, you want to have the right amount of product on hand to meet sales while making efficient use of capital and avoiding excessive buildup.

Managing inventory involves multiple processes such as:

  • Receiving goods
  • Keeping an accurate count of inventory
  • Designating locations for items
  • Managing orders
  • Directing of picking and packing
  • Processing documents such as invoices, bills of lading and order sheets
  • Handling returns
  • Auditing orders and inventories
  • Analyzing and forecasting turnover, demand and reorder

Warehouse inventory management falls under the umbrella of warehouse management, a broader application that includes other aspects of operating warehouses, including location, design and operations.

Warehouse Management System vs. Inventory Management System

Inventory management software (IMS) tracks and controls physical goods at key points on the supply chain. Warehouse management systems (WMS) are comprehensive software suites that sometimes also address additional functions such as labor management.

Systems for managing warehouses and inventory often overlap. Many WMS include inventory management capability, and many IMS have the potential to add on modules with features normally considered to be part of a WMS. But we can broadly summarize the differences as follows:

Warehouse Management System vs. Inventory Management System

A WMS controls warehouses and all their spaces such as bins, shelves, rooms, storage, movement of goods and workflows. An IMS specializes in managing and counting individual items or SKUs held in those spaces and related processes such as receiving.

WMS are more complex and add functions such as production and sales. Warehouse management systems can create and designate SKUs and support kitting, which is when you combine multiple SKUs in a package under a new SKU. These systems are intended to manage and optimize every aspect of operating a warehouse or multiple warehouses.

IMS are less complicated and focus on handling a physical product. IMS systems are often used as standalone solutions in small to midsize organizations with a limited product range. These companies don’t need the complexity of a WMS. An IMS tracks the total amounts of inventory in a specific area of a warehouse while WMS is more granular and looks at individual bins or compartments.

WMS can locate a specific item in the warehouse while IMS generally only tells you a quantity of a SKU in the warehouse.

The two systems are similar in that they monitor product levels and help manage order picking and packing, shipping and receiving. Most WMS and some IMS can track and control inventory for multiple online ecommerce sites, marketplaces and physical selling points, so inventory reflects all transactions everywhere, a phenomenon called omnichannel selling. Creating quantity buffers so that you do not oversell is more commonly found in WMS than IMS.

Summary of Features Commonly Found in WMS and IMS

Some specific areas inventory management supports include:

  • Lead time management
  • Buffer/safety stock maintenance
  • Inventory cost calculations and management
  • Monitoring of shelf life and expiration
  • Inventory in motion support
  • Multi-warehouse support and integrations with accounting
  • Enterprise resource planning (ERP)
  • Ecommerce
  • Finance systems and reorder analytics, which recommends timing and quantities for replenishment

Learn more about the details of inventory management by reading our “Essential Guide to Inventory Control.”

Warehouse Inventory Management Methodologies

A number of techniques and methodologies help you manage inventories more effectively. These all seek to minimize the cost of holding stock, streamline warehouse operations and improve your ability to serve customers.

Among the methodologies are:

Just in Time:
Sometimes referred to as JIT, this method is most common in manufacturing. The approach aims to have materials, components and goods arrive at your facility or production site exactly when you need them. This process reduces the amount of inventory that you own, saving money and space.

Another efficient inventory management strategy that’s similar to JIT. As soon as a product arrives, it is shipped. The name cross-docking comes from the idea of having receiving and loading docks facing each other with goods transferred across from one to another. 

ABC Analysis:
Under the so-called Pareto principle, 20% of your products account for 80% of your sales. In an ABC analysis, you classify your items into three categories: A for best sellers (usually 20% of your inventory), B for your medium sellers (usually 30%) and C for your lowest sellers (usually 50% of inventory). You use these ratings to determine things like where to locate an item in your facility and reorder frequency. 

Two-Bin Method:
This method for inventory control is seldom used today. It involves keeping your working stock of an item in one bin and reserve stock in a second. The amount in the second bin is how much you will need during the lead time for replenishment. You reorder as soon as the working bin is empty, and the replacements should arrive before you use everything in the second bin. This technique ensures adequate inventory levels and removes the guesswork from reordering decisions.

Fixed Order Quantity:
With this system, you order a set amount of new inventory when the stock on hand falls to a previously identified reorder threshold. This inventory control method determines how much to order and when to do so. Usually paired with automated monitoring, this system reduces the potential for human error, such as someone forgetting a restock order.

Fixed-Period Ordering:
This inventory control technique calls for placing orders at regular intervals, but the quantity will vary every time based on fluctuations in demand. This method is highly responsive and suitable for use with items that have significant variability, such as fast sellers or those with seasonal swings in demand.

Vendor-Managed Inventory:
With this technique, you give your vendor information about your sales trends and business policies. The vendor then takes on responsibility for ensuring you have the agreed-upon inventory amount on hand. This option results in reduced procurement costs and eliminates the need to keep safety stock on hand.

Drop Shipping:
This method eliminates holding inventory. When a customer orders an item, you purchase it from a supplier and ship it directly to the customer. Your overhead costs drop sharply with this approach, but your shipping expenses are higher. You also run higher risks of stockouts, and vendor management becomes more complicated.

Warehouse Inventory Management Challenges

As you have seen, efficient warehouse inventory management is complicated to execute. Among the most pressing challenges are the complexity in supplying products quickly when you have multiple sales channels, juggling competing demands from various buyers and store locations and keeping track of the needs of your customers and staff.

Many inventory managers say that the highest priority challenge is achieving accuracy in inventory counts. These numbers are required to produce accurate financial reports and comply with laws such as the Sarbanes-Oxley Act governing public companies in the United States.

But accurate inventory is also critical to a business’s financial health. Hold too little inventory, and you will lose sales to your competitors when you cannot meet customer demand. But hold too much inventory, and your profitability suffers because you tie up capital unproductively, occupy too much real estate, miss opportunities and may even have to cut your prices.

Inventory accuracy impacts your ability to fulfill customer orders and maximize profits. If you think you have an item that you don’t, you may accept a customer order that you cannot fill. If you don’t believe you have an item that you do, you may order more than you need. Similarly, you need to know where each item is because searching can delay an order or cause you to cancel it.

Determining how much inventory is just right is complicated. Historical trends can offer a yardstick. Still, there’s a complex interplay of other variables at work too. These include fluctuating demand, competitor behavior, product perishability, innovation, length of the sales cycle, seasonality, manufacturing time and industry trends.

If you manufacture beach umbrellas, it’s a safe bet you’ll want to hold fewer in inventory in winter than summer. But imagine how much more complicated this calculation gets if you produce oil drilling equipment that takes months to build and demand from exploration projects varies with the price of oil, the pace of discoveries, regulatory changes and other factors. Skillful warehouse inventory management can make a critical difference in your profitability. 

Warehouse Inventory Management Benefits

Benefits of strong inventory management include better productivity; faster picking; savings of time, money and labor; greater accuracy in orders and inventory counts; decreased losses; more satisfied workers; smooth-running operations and omnichannel success.

Applying technology to the challenges of warehouse inventory management addresses many inefficiencies, including:

Mispicks and Missed Shipments:
Mistakes in picking inventory due to human error can be costly for a warehouse in lost time. When a warehouse ships those items, it becomes even more expensive with returned shipments, loss of customer trust and rushed orders. Software can help eliminate most, if not all of these mistakes with barcoding, QR codes and other sensor technology as well as bin management, ensuring warehouse staff pulls the right inventory at the right time, regardless of training.

Counting Errors:
Annual or twice-annual inventory checks where the whole staff gathers to go over inventory through manual or physical counts needs to become a thing of the past. Manually doing these counts introduces the chance of errors. And what happens for the rest of the year? Are businesses satisfied to only have an accurate count of inventory part of the time? Using automated systems with scanners that store data centrally and updates in real time ensures accurate counts and eliminates additional administrative costs and inefficiencies.

Manual Picking:
One of the most significant expenses of any warehouse is staffing. Inventory management software is well equipped to address this. Modern software packages can inform staff not only about the location of inventory but also the best route to take when pulling multiple orders. Armed with this information, warehouse personnel can do more work in less time. Additionally, when turnover occurs, it doesn’t take new staff members months to understand the layout of the warehouse and the location of items.

Warehouses confront a dilemma in how much inventory to keep on hand. Carry too much stock, and your capital is tied up in products that aren’t selling. Moreover, there are costs to store and manage that inventory, particularly items with limited shelf life. Carry too little, however, and the business runs the risk of stockouts and an inability to meet customer demand. Modern inventory management systems, particularly those tightly integrated with the ERP system, can help with forecasting and demand planning, ensuring that the perfect amount of inventory is on hand. Advances in artificial intelligence (AI) can eventually help businesses account for previously unforeseen circumstances based on things like the weather, customer demand or any range of events that can impact product demand.

Reconciling Incoming Shipments:
Too many warehouses still rely on manual processes for counting and reconciling incoming shipments, which can be error-prone and costly. Barcode scanners and other sensors tied into a warehouse management system not only reduce those errors but also create better working conditions for employees, leading to higher employee loyalty and less turnover and training.

What Is Warehouse Management Inventory Control?

Warehouse management inventory control helps you achieve maximum profit with a minimum investment in inventory while not hurting customer satisfaction. The key is to have the right amount of inventory on hand. Slow-moving products may be kept in relatively few units, while fast-sellers will have more stock.

Efficient inventory control can have a big impact on your profitability. According to the Federal Reserve Bank of St. Louis, U.S. retailers are holding $1.44 in inventory for every $1 in sales. The 1,000 largest non-financial companies have an average 51 days of inventory on hand, according to an analysis by The Hackett Group. 

To achieve optimal inventory control in your warehouse, you need to know when to replenish supplies and by how much, monitor turnover and shelf life and have an up-to-the-minute and accurate accounting of inventory.

Handling Physical Inventory in Warehouse Management

Handling physical inventory is an essential focus for warehouse management, and the primary goals are to know precisely how much of each inventory item you have on hand and where to find it. Best practices include techniques for tracking and counting inventory.

David Altemir, President of Altemir Consulting, says accuracy in stock locating is pivotal.

“Ensure that items are correctly located in your warehouse management system upon their receipt,” he recommends.

“Having a sound set of physical warehouse locations defined in the system, together with ensuring that purchase receipts are transacted accurately, will prevent perceived material shortages and needless inventory adjustments because items could not be physically located.”

Label Everything:
Use scanners, barcodes, RFID tags, QR codes, NFC tags or other systems for controlling inventory, equipment and locations. Employ SKUs to identify items. These tools will assist your efforts to fill orders efficiently and keep accurate inventory counts. 

Monitor Constantly:
Warehouse specialists say using both fixed and movable tracking is important for inventory efficiency. Fixed tracking is the continuous monitoring of assets such as manufacturing machinery or order fulfillment equipment for location and condition. Movable tracking monitors where each product or unit of inventory is, how many you have and which need reordering.

Employ Cycle Counting:
While many companies do a complete physical inventory once a year, pros advocate a method called cycle counting. This process involves counting part of your inventory on a rotating basis so that over a given period, you will have counted everything and cross-checked it with your records. Schedule physical counting in advance.

Some experts recommend counting all products at least once a quarter; others suggest focusing on the 20% of your inventory that accounts for most sales or profits. You can also do a random sampling.

In reality, your approach depends on resources, such as how many people are available to dedicate to the task. If possible, use a consistent crew of trained people each time, and ensure they are not from the ranks of staff who might create input errors. Otherwise, they will have a stake in covering up inaccuracies. Have two people count every item, and compare their counts for accuracy. Post counts to keep inventory in check.

If you find errors, try to determine the cause so that you can improve your processes. Remember that you do not necessarily have to touch each item physically. For tiny parts, for example, you could weigh them.

Do cycle counting when order picking is not active and you have accounted for all shipping and receiving. Lastly, whichever system you use to rotate through inventory items, stick with the same pattern. The more frequently you do your count, the more accurate it will be.

Don’t Forget About Items in Limbo:
Inventory counts lose their utility if you disregard items in limbo, such as goods on your receiving dock which have not yet been processed and are not reflected in your counts. Similarly, returns are often thrown together in a bin for sorting later. But if you don’t scan them into your system, you will likely lose sight of the fact that you have them and not be able to sell them. That represents lost revenue.

How to Organize Warehouse Inventory Effectively

An efficient arrangement for inventory helps streamline counting, storing, picking and pulling. The best way to organize your warehouse depends on your specific needs. Here is a step-by-step process for assessing your space and needs and then designing the right organization.

  • Gather Information:
    Whether you are moving into a new space or revamping an existing one, start by gathering plans or documenting the area by measuring it yourself. Then ask questions such as:
    • How much space do employees need to do their jobs properly?
    • How do current and future trends in our business impact the layout?
    • Has there been a significant increase in orders since the space was originally designed?
    • Will there be a major new product introduced with different requirements?
    • Will specific inventory strategies impact the layout, such as wave picking and cross-docking?
    • How can we maximize the efficiency of our operation through a smart layout?
  • Design an Efficient Floor Plan:
    Next, sketch out a layout that designates adequate space for receiving, inventory storage, packing, shipping and office functions. A manufacturer would also need to include assembly and/or production space. Remember to allow clearance for pallets, doors and gates. Leave enough room for pathways and aisles so people and equipment can move easily, including around corners. Resist the temptation to scrimp on the receiving area. Staff will be more prone to receiving errors if they don’t have adequate space, especially to handle the paperwork. 
  • Use a Strategic Inventory Layout:
    Slotting, which is the process of designating a location for goods, can be done in a variety of ways, but make sure that your most popular products (from an ABC analysis) are highly accessible. Retrieving products from inventory is the most labor-intensive operation in manually run warehouses and a highly capital intensive one for automated warehouses. So, improving the productivity of order picking is a top priority. Many warehousing experts urge you to locate the fastest-selling products nearest the packing area. If you are in a seasonal industry, these products will vary by time of year. Don’t forget to maximize the use of your vertical space with slower-moving products in less-accessible spots.
  • Choose Storage Wisely:
    Pick racks, shelves, containers and bins that are versatile, allow for good traffic flow and are compatible with your equipment such as forklifts. The exact type and size of storage will depend on your operation and products. Take time to decide whether to use a dedicated/fixed bin system (in which you store a certain item of inventory in a particular bin) or a random/floating bin system (in which you put an item in any available bin). The tradeoffs are space efficiency, accessibility and amount of handling. Fixed bin systems are estimated to require 65-85% percent more space.
    Effective Warehouse Layout

    effective warehouse layout

Warehouse Inventory Management Software and Inbound Logistics

Inbound logistics are the main sources of a company’s transportation costs. A warehouse management system can ensure products meet a company’s requirements by automating inspections and tracking vendor quality with mobile applications for receiving, picking and cycle counting.

As employees receive purchase orders, they can track what’s overdue or have been identified as a critical item for follow up.

A WMS can also help with quality assurance, providing detailed inspection plans, tracking items that fail and expediting returns. Sophisticated systems will also offer container tracking for inbound shipment management to assist in updating and receiving all purchase orders within the software and providing landed cost calculations.

With a WMS, companies can quickly and easily find low-cost carriers and more accurately manage inventory to help avoid stockouts, overstock, overbilling and maximize efficient use of space. Additionally, with a real-time system to track inbound logistics, a company can ensure it is compliant with any rules suppliers may have around storage and handling.

Warehouse Inventory Management Software and Outbound Logistics

On the outbound logistics side, warehouse inventory management software is critical to a business’s relationship with its customers. For most supply chain professionals, on-time delivery is the most crucial customer service metric.

Others rely on what is known as the perfect order. The order is delivered to the right place, at the right time, in the right condition, in the right package, in the right quantity, with the right documentation, to the right customer, with the right invoice.

Again, delivering the perfect order is made considerably easier with WMS software, particularly software that is tightly integrated with, or even better, built on the same platform as the manufacturing and inventory management system.

For example, with integrated software, fulfilling an order is streamlined. Once the order is approved, even with a complex workflow, the system can send it straight to fulfillment for efficient pick, pack and ship processes.

Picking becomes easier with handheld, mobile devices that show pick locations through easy-to-use interfaces. Advanced systems can allow businesses with multiple subsidiaries to define which sites can fulfill which items under pre-defined conditions. These tools make fulfillment both more straightforward and more efficient. Meanwhile, common warehouse functions such as task management, user-defined putaway/pick strategies, cycle counting, work orders and kitting are simpler and automated, allowing for suggested putaway and multi-order picking within the WMS.

Businesses operating without warehouse inventory management software are already at a disadvantage as cumbersome manual processes can introduce errors, delay shipping, ship incorrect orders and negatively impact customer loyalty. Additionally, cumbersome internal processes can result in poor use of warehouse resources, improper handling of perishable goods and unnecessary expenses.

A WMS tightly integrated with inventory management, manufacturing and financials give manufacturers, retailers and distributors real-time insight into the business, allowing for data-driven decisions for more efficient operations and improved customer satisfaction.

Experts Share Warehouse Inventory Management Best Practices

Warehouse inventory management best practices optimize the handling of inventory, picking methods, quality control and inventory counting. Experts also emphasize the importance of an improvement mindset.

  • Focus on Process Improvement:
    Make it a priority to set well-documented standards and procedures, says Jeremy Banta, a director of the Warehousing  Education and Research Council and coordinator of the Supply Chain Management Program at Columbus State Community College.

    “Before looking at external inventory control solutions, or new technology, businesses should look inside for areas to improve inventory management. Do you simply fix inventory issues, or do you find (and solve) the root causes?” he asks.

    “A formal process improvement program is the key to not only better inventory management but maximizing overall efficiency in your operations,” he contends.

    “The most common mistake I saw (and still see) is throwing away the plan when things get busy. The just-get-it-done mentality at peak can destroy six months of hard process improvement work in just a few hours. If your management team sends the signal that standards only apply when it’s not busy, they’ve just told everyone that the standards don’t apply at all.”

  • Invest in Technology:
    Automate wherever possible. Warehouse automation is expensive, but automated storage and retrieval systems (AS/RS) have enormous benefits such as being able to update inventory quantities in real time, reduce errors, lower labor costs and increase space efficiency. Voice-guided picking, in which workers get picking instructions through software-connected headsets and wearables such as Google Glass, are now available. Companies often employ partial automation. Whether you use a man-to-goods system in which workers move around the warehouse to fill orders, AS/RS or a hybrid, the choice will have a big impact on your warehouse inventory management. Warehouse and inventory management software are also imperative for most operations. According to a 2017 study by Wasp Barcode, 43% of small and medium-sized businesses either do not track their inventory or use a manual process, so there is a lot of potential for improvement.
  • Save Labor With the Right Picking Process:
    The picking model you use depends on factors such as product volume and may change over time with business conditions. Nevertheless, businesses are always trying to speed up picking and delivery times while reducing costs and errors. Many warehouses use a combination of methods.
    • Piece picking is old school. A worker moves around the warehouse, retrieving items for an order.
    • Part to picker is the opposite. Pickers stay in one spot, and equipment automatically brings them items. While this is technically the most efficient method, it requires a degree of automation that most companies find prohibitively expensive.
    • Wave, batch, cluster and zone picking are the most efficient models.
      • Wave picking designates a sequence so that items are picked for an order in one trip through the warehouse with no duplicated steps. This process makes the warehouse layout crucial, including whether there is enough space between aisles for two-way traffic.
      • Batch picking builds on the wave method by filling multiple orders at a time. This method works well when several orders require the same item. Pickers travel to the location once and can bring all the items to a staging area where they can sort them into individual orders.
      • Cluster picking has pickers moving along a path with a cart carrying a bin or tote for each order, picking items for multiple orders simultaneously. There are automated systems that emulate this method. 
      • Zone picking assigns each worker to a specific area, and workers pick only the products in their zone. They deliver the products to a staging area where they are combined with items from other zones. Zone picking is often a good choice if the warehouse is enormous or if there are different handling requirements for some inventory, such as refrigerated items.
    • Priority Picking:
      You pick certain orders with higher priority based on designated criteria, such as whether the customer paid for next-day delivery; the product is perishable, near expiration or has a short shelf-life; the order follows a customer return due to defective product or order fulfillment error; or the customer is among your most important.
  • Set Balanced Stock Levels:
    By analyzing your sales, lead time and turnover data, you can determine maximum, minimum, average and reorder levels for inventory. This keeps costs down, minimizes waste, prevents order delays and uses warehouse space most efficiently. Altemir says companies often set safety stock levels incorrectly.

    “The common intuition is to prescribe a minimum inventory level based on average demand. However, the purpose of holding safety stock is to guard against sudden variations in demand …,”Altemir explains.

    “It is better to design safety stock levels using statistical techniques that characterize demand variability, rather than average demand. By doing so, inventory reductions of as much as 20-70% are possible while still ensuring fulfillment rates greater than 95%.”

  • Quality Control Matters:
    Double-check order accuracy to prevent returns, customer complaints and order cancellations. Order pickers may verify a SKU with a barcode scanner when selecting the item, and packers then repeat the process. You want to balance speed and accuracy, so choose the checkpoints based on where your warehouse has the most frequent errors.
  • Keep the Inventory Area Tidy:
    Build in time at the end of every shift for clean-up. Make sure aisles are clear, floors are clean and there are no slipping or tripping hazards. Put the equipment away. These practices help maintain productivity, prevent injuries and accidents and help employees do their jobs well.
  • Safety and Security Are Important:
    Restrict access to the inventory area, and require staff to wear ID badges. Keeping outsiders and staff from other parts of the company out averts theft and misplaced products and reduces the potential for accidents. Maintaining high safety standards will boost worker productivity, keep equipment functioning longer, aid in quality and reduce insurance claims.

Warehouse Inventory Management Case Studies

Companies that improve their warehouse inventory management reap real-world cost savings and operational efficiencies. For example, Akustica Inc, a unit of Bosch Group and manufacturer of silicon microphones for consumer electronics, implemented NetSuite software and gained visibility and control over inventory that was in-house as well as in third-party warehouses in the United States, Europe and Asia. Learn more about how Akustica uses NetSuite for inventory control.

“Because we now have accurate, real-time data, we’ve been able to greatly reduce the number of physical inventories we have to perform. We can now schedule inventories every six months to a year, and our process is still very auditable,” says Bryan Bishop, director of supply chain at Akustica.

Ibex Outdoor Clothing, a Vermont-based maker of natural wool garments, saw its business expand dramatically, but its systems were not able to adapt. This growth caused picking and fulfillment errors.

“As we continue to add products, we have to use every nook and cranny of our warehouse to house our inventory,” notes IT/operations manager Jay Moltz.

Investing in new software that included mobile functionality resulted in a huge efficiency boost to Ibex’s packing speed — cutting order fulfillment time by more than half and decreasing mispicks by 98%. Read about other inefficiencies Ibex Outdoor Clothing overcame.

Lacrosse equipment retailer SportStop similarly saw inventory efficiency gains from adopting more robust software, saving the equivalent costs of 10 full-time employees. It was also able to reduce inventory waste, enabling the company to increase sales by 34% with just a 10% increase in inventory. 

How to Pick the Right Warehouse Inventory Management Software

If you are ready to implement warehouse inventory software management, you will want to assess your needs and the features and functions of different solutions. Below are some of the most significant considerations.

Choose the Features That You Need

You will, of course, want a solution that meets all of your current needs, but you will also want it to grow with you and meet future requirements.

  • RealTime Monitoring:
    To maximize your business, it’s imperative that you know what’s in inventory in real time. This process involves deducting items immediately upon purchase and adding to stock as soon as you receive goods. Having this capability is imperative for JIT or if you want to understand your inventory velocity for more accurate ordering decisions.
  • Modular Design:
    Having the ability to add modules that offer other features and functions can accommodate future growth. A benefit of modular design is that you can choose a system that meets your current needs without having complex features that you don’t yet require.  
  • Location Tracking:
    The feature monitors where you store an item within your warehouse and makes picking more efficient. Location tracking usually works with scanners, RFID and similar systems. You may have set or default locations for certain items, or your putaway may use dynamic strategies. You might even have the same SKUs stored in multiple locations simultaneously, and software can help you track all of this.  
  • Multi-Warehouse Support:
    Companies with more than one warehouse need software that can support multiple locations and easily accommodate any additions. Look for software that keeps a centralized log of inventory counts and locations.
  • Mobile-Friendly:
    The rise of mobile devices has been a game-changer in warehousing and logistics. As such, your software should work seamlessly with smartphones, tablets, scanners and other tools your staff commonly use, so that all stakeholders have access to the same, real-time information.
  • Receiving and Putaway:
    Record incoming shipments and where you store every item. Allocate bins and perform slotting in the most efficient way possible.
  • Ecommerce Support:
    You want software that will support all your selling channels, which might include your website, Amazon, eBay, social media, physical locations and more. Look for real-time, two-way inventory syncing to avoid overselling. 
  • Picking:
    Plan your order picking to eliminate extra movement, including planning for strategies such as wave and cluster picking.
  • Inventory Cost Analysis:
    Having good visibility into how much you are spending on inventory is important. Aside from the cost of your products, you need to factor in such expenses as inbound shipping, insurance and carrying costs like utilities and warehouse ease payments. Some software can support cost methods such as FIFO (first in, first out), LIFO (last in, first out) and WAC (weighted average cost), but that capability is more commonly found in ERP and WMS.
  • Reporting Tools:
    The ability to generate alerts and notifications is useful. Many solutions can monitor inventory levels and notify you when stock is low or it is time to reorder. Solutions also offer standard and customizable reports. These reports generally include inventory analysis by product, individual customer sales history, reorder reports and inventory by SKU or other characteristics. Dashboards provide a quick visual snapshot of key metrics that matter to you.  

Why You Don’t Want to Use Excel for Warehouse Inventory Management

Many businesses start off tracking inventory with manual processes using spreadsheets, but Excel and similar programs have flaws as inventory management tools. While these tools are inexpensive, inventory management mistakes could be eating up your profits. Here are some of the challenges of using Excel for warehouse inventory management:

  • Labor Intensive:
    Excel spreadsheets require manual counting, verification and data inputting.
  • Error Prone:
    This amount of human involvement creates a big potential for errors in data entry and counting, especially as your product line and inventory grow.
  • Access Restricted:
    If you are using one Excel workbook, only one person can edit it at a time. This limitation forces others to act without the benefit of up-to-date information and increases the potential for errors.
  • Out of Sync:
    Your spreadsheet will not automatically update in real time, so at any given moment, you never really know exactly where your inventory stands.
  • Limited Analysis:
    Generating forecasts and analyzing historical data is much more difficult in Excel.

Expert Tips on Selecting Inventory Management Systems and Software

As you compare solutions and vendors, experts recommend evaluating potential products on several criteria. Be sure to ask the following questions:

  • Will the application integrate with your finance or accounting system?
    Integration is essential to eliminate manual workflows, and vendors usually offer multiple integrations. Ensure the solution supports the system your finance department uses currently.
  • How disruptive will implementation be?
    Ask vendors how much downtime will be required for installation and setup. See if they will find ways to reduce the impact, such as rolling out the solution during a quiet time or in phases.
  • What are the hardware requirements?
    Review the need for barcode scanners, label printers, POS systems and other devices. Many vendors are now making it possible for your staff to use smartphones and tablets rather than specialized equipment for some functions.
  • Does the vendor have expertise in your industry?
    It’s critical the inventory management system can handle your products and vertical. A clothing company will have different demands for an IMS than a bulk commodity wholesaler. One might be tracking style, size and color while the other cares about storage temperature and weight. If the solution has never been used in your industry, be wary. 
  • Does the software support your specialized requirements?
    While IMS providers often promise they can perform many WMS functions, the applications may not be adequate if you want sophisticated functionality like voice-directed picking. Also, if you are in a vertical that requires a lot of traceability or one that uses catch weight management (tracking both the average quantity of an item per weight as well as the actual), those usually require specialized applications. 

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Create a More Effective Warehouse With NetSuite’s WMS and IMS

Being efficient in managing inbound and outbound logistics demands warehouse inventory management software. Warehouse management solutions can track software along every part of its journey within the warehouse down to the bin level. Native NetSuite offers simple inventory management capabilities through multi-location inventory, bin tracking and cycle counting. The WMS module offers functionality that helps streamline your warehouse operations while adding many industry-leading features such as mobile RF barcode scanning, strategy definition for putaway and picking, task management, returns authorization receipt, cycle count plans and more. NetSuite WMS can help you increase efficiency, improve operational excellence and lower costs for warehouses.

Learn more about how NetSuite’s inventory management system and warehouse management system work together to increase efficiencies and improve inventory accuracy.