Warehouse inventory optimization is the top concern of every business with warehouse logistics. The efficiency of your warehouse operations can dictate everything from your customers satisfaction to your employees workplace experience.
Why Your Business Needs to Rethink Warehouse Inventory Optimization
There is so much potential for improving your profits and efficiency by optimizing your warehouse operations. A poorly managed warehouse can lead to stocking problems as well as logistics issues throughout your production chain.
What You Stand to Gain
There’s a lot that you can gain from optimizing your warehouse inventory.
First things first, you can improve your sales by having a more streamlined relationship to your inventory management. You can also increase lead times and smooth out your overall production. This comes from greater information transparency that allows you to spot other problems in your operations.
At the end of the day, smoother operations and better warehouse management means greater customer satisfaction.
The 3 Core Approaches to Warehouse Inventory Management
Need a place to start with warehouse Inventory management? Here are there of the most successful approaches to inventory management.
ABC analysis organizes your inventory based on sales and production.
The thinking goes like this. Category A accounts for 80% of your sales and 20% of your inventory. Category B accounts for 15% of sales and 50% of your inventory. Lastly category C which accounts for only 5% of sales but a whopping 50% of your inventory.
Organizing your warehouse paste on sales does have some drawbacks. You might miss out on new trends that are just beginning to form and you run the risk of cementing your operations into the current status quo.
Just-in-time inventory management it’s a great choice for smaller operations. When you produce exactly what you need right when you need it, you cut out the risk of over or under production.
The biggest downside with just-in-time logistics is that it is very fragile. Any upsets in your supply chain could lead to months of set back in your production.
Economic Order Quantity
The economic order quantity model attempts to use a mathematical formula to perfect your Warehouse operations. Here’s what it looks like.
Economic Order Quantity = √(2SD/H)
S is your ordering costs, D is the annual quantity demand, and H is the holding cost of your products.
The biggest drawback to this model is that it reshapes your operations into a steady demand instead of seasonal changes.
How Will You Optimize Your Warehouse Inventory?
Properly managing your warehouse inventory can change how you look at your business. This opens up the potential for greater profits, lower overhead, and improved efficiency across the board. Which of these warehouse Inventory management techniques looks the best to you?