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Warehouse Failures: How to Avoid Them, Part 1

4 years ago
Rita K

The sequential processes involved in inventory receipt typically follow a similar order:

  1. Establishment of maximum / minimum quantities of inventory
  2. Cycle count or automated notice of inventory shortage
  3. Automated or manual decision to purchase inventory
  4. Issuance of Purchase Order to supplier
  5. Receipt of Purchase Order confirmation with anticipated shipment / receipt date
  6. Automated, or manual, scheduling receipt of incoming inventory
  7. Anticipating inbound inventory processes (preparing for receipt, location, quality control review, approval, authorization to pay, putaway).
  8. Receiving—physical location / process for goods, move to QC, cross-dock, ship upon receipt, etc.
  9. Quality control review.  Quality processes—pass, reject, partial acceptance, notice to supplier.
  10. Putaway, inventory quantity updates, cost updates, etc.

However, prior to engaging in these processes, several preconditions must exist:

  • The warehouse must be mapped, so that putaway can be accurate and efficient.
  • The items to be received must be entered into the system with full item descriptions loaded.
  • The suppliers must be entered into the system with associated receipt instructions to receiving staff.
  • The price and quantity must be entered into the system to be checked against incoming documentation.
  • COD or other payment processes must be loaded into the system.

There is no substitute for excellent, automated processes to achieve optimal warehouse efficiency and productivity. These processes require careful planning and extensive experience in the automation of manual warehouse processes. Examining the elements of excellent warehouse automation listed above, let’s consider what can go wrong, and how to get it correct…The warehouse must be mapped, so that putaway can be accurate and efficient.It may sound obvious, but a careful warehouse map must be created before any progress can be made. Too often, we have seen warehouse operations that are disorganized to the point of chaos. The business owner thinks a warehouse management software system can solve the problem. But, organizing chaos results in organized chaos. First, step back and think about how the warehouse ought to be organized.  What are the fastest moving items? What are the slowest moving items? Are there heavy or bulky items that required special handling or storage? Is proximity to the shipping department an important consideration? Is there room for expansion as product categories change?

 Can growth be predicted, so that the warehouse doesn’t become a hodgepodge of locations for identical items? Are bins required for small or fungible items? Are serialized inventory items loaded onto warehouse racks in a way that allow old stock to be brought to the front when new stock is added to the back, so that inventory is logically rotated according to receipt date? All of these considerations go into planning in which aisle, row, level and bin inventory should be stored. A good warehouse map will be flexible, to grow and change with product changes.The items to be received must be entered into the system with full item descriptions loaded.Once the warehouse is mapped and planned, the item information must be accurate, timely and complete. Consideration must be given to parent and child relationships. For example a shirt might come in sizes, colors and may have embroidered initials. These attributes of the inventory must be anticipated and the steps or processes must be factored into the inventory system that is adopted. Accuracy of inventory and the management of value-added processes can only be accomplished with precise inventory item descriptions. It will pay large dividends to carefully plan out the inventory description process.

 What forms must be created and used? Who is authorized to enter the data? Are there single or multiple sources for these inventory items? Is it necessary to segregate inventory items from one vendor from those received from another? If so, does that require an inventory item description that can be supplier-specific? Does costing information go into the item description? If not, how is cost computed as newly purchased inventory is acquired at differing costs?The suppliers must be entered into the system with associated receipt instructions to receiving staff.Managing a warehouse begins with receiving and putaway. 

How do receiving personnel anticipate the shipping configurations and packaging associated with any particular supplier? Does your receiving system anticipate any complications that may offer? Is equipment and storage space anticipated with reference to particular suppliers? Loading bays and receiving floor space can often be a very valuable commodity. How can you be best prepared to receive goods from particular suppliers? Where is that information stored and how is it communicated as inventory receipt is scheduled?The price and quantity must be entered into the system to be checked against incoming documentation.It is critical to receive inventory in strict accordance with a purchase order. What if items are missed or backordered? What if pricing is at variance from the purchase order? 

What if quantities are incorrect? Too often these errors are discovered too late and suppliers are unreceptive to complaints. While an accounting system may be separate from a warehouse management system, integration between the two systems is vital to ensure that receipt of inventory is confirmed against contract terms. It is crucially important to know where that information comes from, who is responsible for confirming supplier’s accuracy and what process must be followed when a variance is discovered. By planning these processes prior to the acquisition and implementation of a warehouse management system, these challenges can be effectively managed and controlled.COD or other payment processes must be loaded into the system.If you want to create a traffic jam at the loading dock, schedule a COD shipment and keep it a secret from the accounting department. These seem like simple, obvious requirements, but unless the system is planned, so that vendor information is put into the system and updated on an order-by-order basis, the coordination of inventory receipt and payment processes will not be possible.

There are really too many examples of areas where the coordination of information from separate systems is vital. The message here is that a brainstorming session is an excellent idea, from which a list of activities, or events, that require the coordination and exchange of information can be created. Then, as the inventory and warehouse management systems are being designed, interconnection between the necessary data bases can be anticipated and planned. Only once that is done can the information be effectively and efficiently shared. Every aspect of an effective warehouse management system requires careful and thoughtful planning to ensure that eventualities are anticipated and processes are in place to respond effectively.

Pre-planning for the creation and implementation of a warehouse management system is improved by engaging systems experts from outside the business. The successful implementation of warehouse management systems in a variety of environments will allow a consultant to offer “best practice” advice that will allow a business to create an optimal design.

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