4 Ways Your Inventory Management Strategy is Holding Back Your Supply Chain

Meagan Douglas
Mon, Feb 6, 2017
A great inventory management plan can improve how products move from bins to consumers, improving overall warehouse production.
A great inventory management plan can improve how products move from bins to consumers, improving overall warehouse production.

Managing warehouse inventory is a pivotal part of ensuring even flow of goods from one area of the warehouse to the consumer. However, inventory management and other supply chain obstacles often prohibit this from happening. As you can imagine, this easily damages a company's bottom line due to lost sales, higher product returns and possible increased turnover due to workplace safety hazards and high stress.

To solve this issue, companies need to identify weaknesses in their current inventory management strategy and possibly draft a new one. Here are four problems that may hinder any inventory management strategy plan:

1. Strategy Lacks Clear Vision
Warehouse supervisors have a lot of responsibility. They have to manage shipping and receiving lines, picking, traffic, safety and equipment maintenance, and cycle counts, to name a few. But if their inventory management strategy lacks clear vision and direction, their entire supply chain and supply chain management strategy can come to a grinding halt. 

Creating a plan is complex, and it takes a team of experienced professionals to not only gather all of the data, but develop the strategy and present it to upper management. Assuming you already have one in place, evaluate your strategy to see if it addresses the following: 

  1. Defines Inventory Control: Inventory control is the proper management, storage and recording of products to maintain the right amount of materials to satisfy demand without excessively going above or below that need. A company's ultimate goal should be able to adhere to this definition, and a clear strategy will outline ways for warehouses to achieve this objective.
  2. Identifies the Problems: Supply chains never run perfectly smooth. There could be a problem in picking, slot-placement, or shipping and receiving. Maybe employees fail to unload products off trucks fast enough. Or it's possible that workers wrap items too slowly, causing delays in the shipping process. Shortly, we'll discuss how managers can use automated data collection solutions to track these operational problems with ease.
  3. Evaluates Your Suppliers' Needs: If you work with suppliers that account for a solid chunk of your sales, consider placing their inventory closer to the front of your store. This will save your employees time by making the items more accessible to ship quickly.
  4. Addresses Employees' Roles: To keep your strategy concise, you may want to include a short section (a page at most) that describes the role of each position in the warehouse. You can then expand on the positions' details in a subsequent report, if needed. The different positions you may list could include receiver, shipping specialist, loader, warehouse clerk, warehouse worker and forklift driver and operator.
  5. Evaluates Automated Solutions to Streamline Processes: We'll discuss this in greater detail shortly, but here are the basics: Many companies rely solely on pen and paper to track the movement of their supplies. While manual processing may work in some circumstances - for simple tasks - automated data collection solutions allow workers to better track their inventory and give them greater insights into their inventory management practices, supply chain and supply chain management strategies. 
  6. Examines Poor Communication: We could probably include several more ideas to help you better organize your inventory management strategy, but let's end with this piece of advice: Managers need to constantly communicate plans with their employees. A Gallup study of 7,712 U.S. adults found that employees are most engaged in their work when they have some sort of daily communication with their managers, whether that's by digital means or face-to-face.
  7. Assesses Training Methods: One section of your inventory management strategy should include how you plan to train employees on how to implement the strategy and new processes they're not familiar with. 

2. Plan Lacks Clear Performance Measurement Procedures
We mentioned that part of developing a clear inventory management vision involved identifying problems. It's difficult to do this, however, when management can only subjectively - instead of objectively - identify problems based on hard facts. 

In order to accurately measure a warehouse's performance, managers must set benchmarks. Benchmarking is the practice of comparing current inventory management (or supply chain and supply chain management) procedures to processes that happened at some point in the past. Benchmarking often involves managers analyzing each of their company's warehouses (internal benchmarking), while also consulting other companies for advice on how they operate their supply chains (external benchmarking).

Benchmarking can accomplish a number of inventory management feats such as:

  • Increasing dock arrival times.
  • Accurately recording inventory turnover data.
  • Improving picking operations.
  • Better organizing warehouse - boost flow of traffic and improve safety.
  • Enhancing quality control measures.
  • Revamping safety and security - yes, benchmarking even allows companies to reduce theft of and deterioration and damage to products.

The list goes on from here, but you likely get the point. It's critical to measure a warehouse's performance, but managers must set benchmarks if they want to gain insight into how well their facility is truly operating.

3. Strategy Doesn't Address Latest Technology
In the last two segments we outlined the importance of developing a clear strategy and just how crucial benchmarking is to form that plan.

However, that strategy will likely fall apart if you're not using the right automated data collection solutions. By integrating these devices and software into your warehouse operations, you provide your workforce with an eagle's-eye view into your inventory management and supply chain procedures. 

The question you likely have is: Which type of solution should I purchase?

While we wish we could say there was a do-it-all solution that fits every industry and company, there simply isn't. The first step in figuring out which is best for your business is by identifying key pain points. From there, you can hone in on an enterprise system that can take your warehouse management operations to the next level.

While there isn't a one-size-fits-all system, there are a few things all companies should consider:

  1. Purchase an enterprise mobility solution, which allows workers to input and analyze data in the field.
  2. Use a system that can easily connect to a multitude of enterprise resource planning systems such as SAP, Oracle E-Business Suite and Oracle's JD Edwards, to name a few. An ERP is a backend system that disintegrates harmful office silos so employees from any department can pull data from a single portal.
  3. Concentrate on solutions that focus on improving your supply chain and supply chain management procedures. Pure inventory management solutions exist, but fixing how you run your supply chain operations will often ripple down into other areas of your warehouse like inventory management.

4. Employees Are Under Qualified or Poorly Trained to Carry Out Strategy
Employees are the heartbeat of your supply chain operations. Without qualified, experienced, engaged leaders manning the helm, your supply chain (and everything that comes with it) will collapse. Failing to hire the right employee can:

  • Cost Your Business Money and Time: The Society for Human Resource Management found, in a new report, that the average cost to hire an employee is just over $4,000. And it takes about 42 days to fill a position. Considering that employees play a vital role in the success of your plan, you can see why it's important not to make hiring mistakes. This can cost you resources - that otherwise could have been put into funding your strategy - and time - which could have been used to hit your benchmarks sooner.
  • Slow Operations: The best employees are engaged, productive, work efficiently, and love to collaborate. By making great hiring decisions you can ensure your inventory management strategy takes form with little to no issues.
  • Stall Training: Employees that don't want to learn or can't pick up the material quickly enough because they're not qualified for the position can stall training. This too drains resources and costs upper management precious time.

There are a number of ways distributors can analyze, repair and ultimately optimize their inventory management processes. If you're not sure where to start, the four suggestions presented in this article are great foundations pieces for your inventory management goals.

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