How To Solve Your Inventory Problems

How To Solve Your Inventory Problems

A guide for companies without a WMS

Welcome back to the Laceup blog. Many companies do not have the size to justify the purchase of a Warehouse Management System. If that is your case you need to set up policies and procedures to gain inventory control and ensure the accuracy of your inventory. Today we are going to talk about the most common inventory problems a small business faces and how to address them.

Problem 1: Receiving process

The number one place where most distributors have all their inventory problems is on the receiving process.

• You could be shorted by your vendor
• Your vendor could provide you extra product
• Your vendor could provide the wrong product
• Your people receiving the product into the warehouse could miscount the product itself

There are so many different ways you could mess up during receiving that I have only ever seen one way to truly guarantee that you will not make any inventory errors during the receiving process and that is: every single pallet, every single case that comes out of a container into your warehouse must be counted case by case.

My recommendation is to take your product off the truck. If it is on a pallet, break down the pallet, re-palletize everything, re-wrap it, and count every single item. If there are any discrepancies between the purchase order and the item receipt, you need to ensure that it is reported to your back office personnel so that they enter their receipt of goods directly into your accounting system to alleviate the probability of there being any mistakes.

Problem 2: Picking process

The second place where I see a tremendous amount of inventory problems is during the picking process. Picking people are human and they might make mistakes, especially if they do not have a good “Warehouse Management System”.

• They might pick too much product or too little product
• They might pick the wrong product

In any case, you will be sending out the wrong product to your customer which might damage your relationship with them. If you are a mid-size company, the best way to avoid this is by implementing a WMS. But if you are a small company, the best way to do this is via process: you assign an individual responsible for double-checking everything that gets picked. You might think that this entails additional costs, but you should take into account that your inventory is the lifeblood of your business. It is worthwhile to spend a few thousand dollars in checking the picking and alleviating all your overages and shortages, to control hundreds of thousands of dollars in errors.

Problem 3: Cycle count

Inventory adjustment is one area where many distributors make mistakes. If you have Warehouse Management Software, the probability of making errors counting the products is low because you will know all the places in the warehouse where each product is. But if you do not have WMS, you have no choice but to walk down the entire warehouse whenever you make a cycle count, looking up and down so that you do not miss a product. If you don’t do the counting this way you are going to miss cases of products that you will eliminate from the inventory when you adjust. Since those cases missed are not in the inventory, they will sit in that bin location up to who knows when, until they expire, and that is going directly against your profit and loss.

Problem 4: Incorrect truck loading

Another common source of inventory problems is truck loading. I can’t tell you how many distributors neglect that little process of loading pallets onto a truck. Just because you staged them behind route 1, route 2, route 3, etc., does not mean your people are going to stick them in the right truck. When a pallet is loaded in the wrong truck, a cascade of problems is triggered: the order will be incomplete; the customer might reject the whole order and, if they accept it, changes to the invoice have to be made in the field; you might even lose the customer. The only way to prevent this from happening is with the checker we mentioned before.

Problem 5: Wrong data entry

If you don’t have a WMS in place, you have to input all warehouse transactions manually into the accounting system, and, anytime you do anything by hand, you could make mistakes.

To reduce errors, you need to put in a check and a balance to the warehouse activities and the back office data entry. The way I have seen customers do this is as follows: for every single warehouse transaction handed into your back office, there should be a piece of paper record signed off by the warehouse employee. Now your back office employee starts to hand key the data. The way that you ensure they don’t make any mistakes is by making them double check everything. Once they double count every item and validate it versus the initial piece of paper, they have to check a “verified” field in the accounting indicating the person who verified. That verified record is printed, stapled to the original, and filed.

If somebody makes a mistake they can be held accountable because you have an original copy of the transaction and a hand-keyed copy of the transaction stapled together. It may seem a little bit tedious but if you don’t do this you are running the risk of messing up your entire inventory.

I hope this article helps you keep in check the accuracy of your inventory until you are big enough to implement a Warehouse Management System. We will continue publishing information related to warehouse management and distribution practices. If you are interested in this article or want to learn more about Laceup Solutions, register to keep you updated on future articles.