5 Steps for Distributors to Keep On-Hand Inventory Data Accurate

Help your company keep on-hand inventory accurate, by following the 5 key steps as you implement your warehouse management system.

Jeff Johnston

Consulting Manager

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    Maintaining accurate warehouse inventory and providing visibility across the company sets the stage for distributors to meet customer expectations. Knowing what’s in stock and available to sell allows the sales team to take orders with the confidence that they can be fulfilled on time.

    And the procurement team can compare real-time inventory availability to the forecasted customer demand to make sure stock is replenished as needed. To help your distribution company keep on-hand inventory accurate, here are the five key steps to follow as you implement or fine-tune your warehouse management system.

    #1 – Build a Solid Foundation

    Start by creating just one warehouse management system instance for each physical warehouse space. Some companies set up multiple virtual instances, such as one for the main area and others for testing and returns. But this can create confusion as you handle more volume.

    Also use granular bin location tracking—with separate locations for shelves and racks instead of large virtual bulk locations that are difficult to keep track of. Tracking will also be easier if you add barcodes to the bin locations. Even if you do not use barcode scanning today, this will help down the road as you grow.

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    It’s best to use a bin location naming scheme that matches the physical layout of the building. This is particularly helpful when you take on a new product line, and as you add racks, you want your naming convention to stay alphanumeric. You may want to set up locations in a serpentine manner so pickers can go down to the end of an aisle picking A to Z, and then come back picking the other way.

    If you add weights and dimensions to products, you can ensure the products are stored in the correct locations and fit properly in those locations. This also helps you conform to requirements on how many pounds a rack can hold and how many items can fit in each location.

    In addition to these warehouse management system considerations, think about what you can do for your warehouse staff. You can enable them to interact with the system more efficiently by documenting instructions for all warehouse tasks such as put-aways and picks. Also train them on proper inventory handling.

    #2 – Streamline Receiving

    Your first line of defense in keeping inventory accurate is how you handle receiving as purchase order shipments, returns, and transfers come into the warehouse. Determine the method of receiving based on your scenario. For example, do you receive a single purchase order at a time or multiples assigned to a single license plate? Will there be separate license plates for every item received? Will items be received to a single cart or multiple carts?

    If not already provided by your vendors, be sure to print labels for all items received. This identifies products and can be used for downstream scanning. Also establish a quality control program for incoming receipts and record the results in the system. Elaborate quality test plans may require a separate quality management system, but your warehouse management system should allow you to document simple pass/fail tests as well as visual tests to examine packages for damages.

    Also consider your testing protocols. Will you sample a small percentage of each purchase order? Will you skip certain receipts? And which vendors will you test? You might test all of them, or perhaps limit testing to new vendors or those with past quality issues.

    #3 – Automate Data Collection

    Barcode scanning is the first step in automating data collection and typically begins during the put-away process, but you could start scanning at the receiving stage. The premise is simple: Anytime inventory is moved, use a barcode scanner to perform the transaction.

    This immediately updates the inventory management system and gives your entire company real-time visibility into current inventory levels. You will also find that picking accuracy improves compared to using count sheets with manual updates and then keying them, which is error-prone and takes a lot longer.

    When first deployed, barcode scanning will not make your warehouse run faster as adding controls to scan barcodes for all transactions takes time. However, the payoff comes in big from the highly accurate inventory you will have, which is critical for your sales and procurement teams.

    If you use license plates, you can simplify the handling of serialized inventory. The warehouse team can move an entire tote, cart or pallet of items with a single scan rather than scanning all the items one at a time. If possible, have your vendors send you the license plate structure for incoming purchases. This will streamline both receiving and put-away.

    #4 – Implement Cycle Counting

    Many companies have adopted routine cycle counts as opposed to annual physical inventories, which can require shutting down operations for several days. Your financial team will likely dictate the frequency of cycle counts and the methodology, which may be ABC counts, by bin locations, ascending (A-Z), or the number of bin locations per day or per week.

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    An alternative option is to count inventory when the quantity is at its lowest for an item, which reduces the counting time. Another option is to use total item counting to quickly count the full quantity of an item with a thousand serial numbers in a location. Instead of scanning, simply count them. If there is a variance, you would then count each individual serial.

    As part of your process, also determine who can accept and reject count variances. You may want to set a value limit that warehouse personnel are authorized to count without requiring approval.

    #5 – Integrate with 3PLs

    If you use third-party logistics companies to deliver items to customers, you want to avoid inaccurate inventory, which can happen when transactions are manually entered between your warehouse management system and the 3PL provider’s system. Instead, integrate transactions so data flows automatically.

    The types of transactions to track include each time you send inventory to the 3PL, when the 3PL receives the inventory, fulfillment requests for the 3PL to ship parts, and when the 3PL picks or ships parts. Tacking all these activities will allow your warehouse management system to automatically deduct inventory as it moves from your warehouse to the 3PL.

    Give Your Company Real-Time Visibility Into Inventory Availability

    To learn more about the five steps for keeping your warehouse inventory accurate, check out this webinar presented by Paul Taylor, a Senior Solutions Architect for Velocity who specializes in deploying warehouse management systems for distributors. As the five steps illustrate, there are many contributing factors to keeping warehouse inventory accurate, and Paul can help you sort through them.

    Paul also discusses how Microsoft Dynamics 365 Supply Chain Management includes advanced inventory management tools for real-time tracking of inventory. These include mobile barcode scanning, label printing, and common warehouse processes such as receipts, put-aways, movements, picks, and inventory counts. The solution brings all key warehouse functions into one centralized system so your entire company always has visibility into real-time inventory availability.

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    Jeff Johnston

    Consulting Manager

    Follow Me: