As the adage goes, ‘time is money’ and of course, saving time to save money requires increased efficiency. In business, the way you run your backend in the warehouse, which considers the supply, receipt, manufacture and storage of inventory, is very telling for how profitable your frontend will be. Inefficient and sloppy warehouse and inventory management can have a significant and direct effect on customer sales and loyalty, which can spell the slow demise of your bottom line. In this article we consider some methods to increase efficiency and grow a healthier business.
With this new and growing wave of online retail, the volume of sales increases exponentially. More sales mean more inventory which means a company needs to expand supply chains and increase storage capacity. To further exacerbate this is the growing trend of personalisation of products. This creates more and more variations resulting in more SKUs that require storage.
Efficiency is all down to expert design of systems and storage solutions so that downtime and wasted movements can be eliminated. With increased storage requirements, it is not always possible to simply build a whole new storage facility due to the huge cost. Therefore, it is important to increase storage by building upwards towards the ceiling in existing locations. You could also cut down on aisle widths and add more storage columns instead. When it comes to picking products for orders, you could introduce one-way traffic aisles where equipment handlers can access the aisle on either side. In doing so, you eliminate collisions, reduce travel time and reduce the safety risk of staff constantly exiting equipment handlers to physically access a product.
Supply chains and operation design
A large influencing component of warehouse inventory management is the preceding supply chain that got a product into the warehouse in the first place. They can be a double-edged sword as you have less control over them than your own manufacturing process, and if you run them too lean to save storage time and space, you could end up in a sticky situation with no product.
Alternatively, if you run them cautiously, not trusting your suppliers and so retaining a lot of safety stock for the ‘what if’ scenario, then you could end up with far too much inventory, causing efficiency and control to suffer. Therefore, it is imperative to take the time to understand your own production capabilities and bottlenecks, while also understanding your supply chains and how your suppliers run their business. With this information, coupled with sales data, you can better plan what inventory you will need and when, so that you can implement efficiency throughout the supply and manufacturing processes.
Automation is being introduced into all areas of manufacturing and the warehouse is no different. Many inventory management and WMS systems come with RFID technology where radiofrequency tags are automatically ‘read’ and recorded giving volume and locational data of items. Studies into RFID tags have shown a great improvement in inventory management accuracy by as much as 27% in just three months.
Lean manufacture and employee training
Lean manufacture under the 5S system is a golden standard in terms of efficiency. First pioneered by Toyota as part of their Kaizen (continuous improvement) approach to production, 5S uses the constructs of sort, set in order, shine, standardise and sustain. It dictates that items, be it production materials or tools, should be sorted so that there is just enough in the location where they are actually used, that they must be kept clean and usable, that processes around them must be standardised and the same every time, and that operational organisation must be designed around continuous improvement and sustaining the gains made.
This methodology is very useful in the warehouse environment and when implemented, can do wonders for efficiency. The company is only as strong as their weakest link, however, and so employee training and adoption of goals is vital for a truly efficient workplace.
To do so, encourage continuous improvement and involve employees in any new and improved processes. Take on board suggestions and provide extra training where needed or incentives to be perpetually improving in their work. When all these things work in harmony, efficiency can become a reality and significantly improve the company’s profitability.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.