If you’ve been looking for an in-depth resource on all things inventory management, then you’ve come to the right place. Inventory management is a very broad topic, and adding a warehouse before it doesn’t necessarily slim it down much. If you’re looking for a blog post that breaks down different inventory management practices into very simple forms, then check out our blog for more!

In this guide, we’re going to give you a thirty-thousand-foot view of all things warehouse inventory management and what it means to have successful warehouse inventory management practices. We’re covering everything from common systems to techniques, best practices, and top tools to consider to help you get the job done. Let’s get started!

What is Warehouse Inventory Management?

Before getting too far into the weeds, we should lay out a general example of warehouse inventory management.

Business news daily defines warehouse inventory management in this way: “Warehouse inventory management is the process by which stock stored in a warehouse or other storage facility is received, tracked, audited and managed for order fulfillment.”

So, in many ways, warehouse inventory management as a whole pertains to anything that goes on at a warehouse directly related to inventory and orders. The role of warehouse inventory management often falls on the warehouse inventory manager. Much of the work that is done in this system and process can be done with the help of software systems and AI technology. But, not all warehouses use these technologies, and some will require their staff to make all of the calculations and tracking by hand.

Merchandise inventory software on a computer screen.

Common Warehouse and Inventory Management Systems

A number of systems are commonly used throughout this industry to help steward jobs and make the industry better overall. Some of them are universal, and others may pertain more to one category over the other. We should state that an inventory management system is slightly different from a warehouse management system.

Inventory Management Systems

Inventory management systems are the processes used to track inventory throughout your warehouse and supply chain. These processes can be extensive, and they can be very simple. But, they always have a few key metrics that are tracked.

A good inventory management system is going to track incoming orders, stock levels, and outgoing orders. This will allow you to know when you should be shipping and when you will be receiving or sending out orders.

The simplest of ways to track your inventory is with a spreadsheet, and some of the most robust ways include fully customizable inventory management software systems. TopShelf from Scout is a great example of a customizable software solution that can integrate with your point of sale platform and warehouse to track your incoming and outgoing orders as well as stock levels. This helps you keep up to date on where your inventory is at without dedicating a lot of working hours to it.

Warehouse Management Systems

Unlike an inventory management system, a warehouse management system will offer more features and the ability to track different metrics throughout your warehouse and not just your inventory. Almost all warehouse management systems will track inventory to some extent, but it’s rarely the primary focus of the software or process.

One of the main focuses that a warehouse management system will have the ability to track employees and help them pick, pack, and ship products from your warehouse. It will also help you perform counting and keep your warehouse running smoothly. Finding the right WMS (warehouse management system) for your business can make all the difference.

Warehouse Management vs. Inventory Management

As long as we’re talking about the two different processes, warehouse management vs. inventory management, here are some of the pros and cons of running one vs. the other.

These processes have large amounts of overlap, at least from the side of warehouse management. We defined them a bit above. Inventory management systems will solely focus on tracking a companies stock, orders, and inventory going in and out every week. But a warehouse management system is going to also track employees and help employees complete tasks throughout the warehouse. But, warehouse management systems will often also offer the ability to do everything that an inventory management system does as well.

Warehouse or Inventory Management? What’s Right for You

If you’re trying to decide whether a warehouse system or an inventory system is right for your business, then you really need to only answer a few different questions. We’ll lay them out for you.

  • Do you have employees that you need to manage through software solutions or processes?
  • Do you have multiple locations where you store inventory?
  • Do you need help finding inventory items throughout a warehouse?

If you answered yes to all of these questions, then you likely need to look into a warehouse management system and not just an inventory management system. If you answered no, then you’re probably just looking to manage and keep track of your inventory supply chain. In that case, an inventory management solution will be perfect for your business.

Inventory Management Best Practices

Here are some of the best practices that are used throughout the warehousing and e-commerce business. A good warehouse inventory management system will have a number of fluid roles and rules to keep everything running smoothly.

Categorize Your Inventory Using the ABC Method

Having specific categories set up for your inventory will make a huge difference in your overall process. For some businesses, this is elementary, but if you’re just getting started in the world of warehousing and e-commerce, then you’ll want to understand this practice. Here’s a quick definition.

ABC method refers to how you’ll store and access inventory in your warehouse.

  • A refers to high-value, low sales inventory. This inventory is almost always more expensive but will offer you the highest profit margin.
  • B refers to mid-value, mid-sales inventory. This is all of the items that you’re regularly moving but aren’t your fastest or highest seller.
  • C refers to a lower value, high sale inventory. These are smaller items that you’re always moving and rarely storing over long periods of time. These items have a lower profit margin but do often sell enough to make up for that.

You can learn more about different merchandising and inventory methods here.

Optimize Your Pick and Pack Process

Your pick and pack processes will make your warehouse what it is. Either your company is very efficient and able to get lots of inventory moved through successful systems and processes or not. The pick and pack process can be optimized through a number of systems. Here are a few of the best from our 11 optimizations blog post.

  • Strive for 85% occupancy to avoid clutter.
  • Place most frequently picked items in the most accessible location.
  • Train staff on standardized processes.
  • Use slotting to store more items efficiently.
  • Automate processes to reduce the chance of human error.

Establish Your Inventory KPI’s

Have good KPIs (key performance indicators) throughout your inventory processes will help you know what’s working vs. what’s not. This will be easy to see, while in others, it might not be quite as easy. Set sales goals to know how much inventory you want to move and how fast you want to move it. Inventory turnover should be a key part of your companies performance. The best thing for your business will be having a minimal amount of money invested in inventory that isn’t regularly moving in and out of your warehouse.

Use Batch Tracking

Batch tracking is another way to see how often you’re moving inventory. What happens in this process is that a set of lot numbers or batch numbers are assigned to a group of inventory items that were purchased at the same time. Then that batch can be tracked throughout the entirety of the supply chain.

warehouse technology trends

Establish an Accurate Reorder Point

Knowing at what point you’ll need to reorder inventory will help ensure that you’re never over-ordering for the amount of space you have and that you’re not running out of stock before your new inventory arrives.

The best way to stay aware of your reorder point is to keep open communication with your providers and those that are shipping you the new inventory. Establish more than one reorder point so that you know when to start talking to your supplier and when to push the order through.

Carry Safety Stock

Safety stock is often 10% or so of the total inventory that you carry. This is something that you should have for high-volume sales items that you’re more likely to run out of.

Safety stock should also be occasionally turned over so that nothing sits on the shelf for too long and that you don’t get got caught with dead stock. For more on safety stock, click here.

Optimize Your Inventory Turnover Rate

Your turnover rate is the amount of time and rate at which new inventory is sold and replaced with a reordered inventory. Optimizing this process will mean that you have low amounts of stock sitting at one time and a healthy stream of both inventories going out and inventory coming in.

An unhealthy warehouse or e-commerce company will have a low inventory turnover rate.

Streamline Your Stocktake

Stocktake refers to the process of counting your inventory to ensure that you have a real and accurate count of your inventory. Without an accurate count of your inventory, your business is going to struggle to stay afloat because of the added pressure of uncertainty.

By streamlining the process and having a successful plan for your company’s inventory or stocktake practices, you can help ensure that employees are making any costly mistakes. Be sure to have these steps in place.

  • Schedule regular stocktakes
  • Clean and organize your warehouse and stock
  • Know what stock is being counted and when
  • Open and count everything – don’t leave room for guessing

Maintain Healthy Inventory Levels – Avoiding Bloating

Maintaining healthy inventory levels while avoiding bloating within your warehouse is extremely important for any warehousing company. This goes make to reorder processes, safety stock, and counting or stocktaking. Healthy inventory levels will prepare your business for both more orders and business or fewer. Either way, you’ll be able to handle whatever comes.

Use a Cloud-Based Inventory System

Lastly, a cloud-based inventory management system will help you do many of the above tasks more efficiently and effectively. There are a number of different inventory management software systems on the market, and many of them are very similar in their offerings. The best thing to do is find an inventory management system that offers flexibility and scalability.

TopShelf from Scout is one of these products that offers a completely cloud-based, customized inventory or warehouse management system. You’ll have everything you need from tracking employees to tracking inventory throughout the entire supply chain.

Warehouse Inventory Management Solutions

organized warehouse workers using an inventory management system

Among the different solutions for more effective warehouse management are software and artificial intelligence. Many warehouses have embraced technology as a way to limit the number of employees needed for completing tasks and even to pick and pack items just like employees would.

But, because most warehouse companies aren’t in a position to use technology solutions such as AI software solutions have been making the largest impact lately. Warehouse management tools can allow you to track inventory throughout the entire supply chain and even between multiple warehouses while also keeping up with order tracking, accounting, and reorder times.

A good software solution will allow you to understand and do more than you thought possible without ever having to create an excel spreadsheet on your own.

If you’re ready to learn more about some of the different inventory management solutions on the market, reach out to us. At Scout, we specialize in customizable software solutions that can track your inventory, print labels, and seamlessly integrate across your sales platforms to help produce reports and forecast demand for the products that you’re selling.

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