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How to Improve Warehouse Inventory and Supply Chain Management

Mar 27, 2019
By: Reed Klinkhammer
Manufacturing and Distribution

Warehouse Inventory and Supply Chain Management

While IoT devices are commonplace on manufacturing plant floors — and the latest software platforms are leveraged in various office settings — many warehouses still operate much like they did before the digital age.

It’s not uncommon for inventory levels to be tracked using tribal knowledge — a warehouse manager just “kind of knows” where inventory levels are at and can point someone to a shelf where an item is kept. Others may keep track of inventory in a spreadsheet or hand-written document. If and when someone notices that inventory levels are getting low, they submit a purchase request to get more.

The trouble comes when the person overseeing it all calls in sick, goes on vacation or, worse yet, is lured away to another company — a scenario that isn’t all too uncommon in today’s tight labor market. Additionally, this approach is prone to human error, resulting in stock-outs, frustrations across departments and lost revenue.

There are numerous opportunities for manufacturers to enhance efficiencies by bringing their warehouse operations into the technological fold. Here, we’ll look at how NetSuite enterprise resource planning (ERP) software, which is used to improve other departmental workflows, can also benefit inventory and supply chain management.

Real-Time Inventory Benefits All Departments

Inventory processes and workflows vary widely among manufacturers. Some use sophisticated barcode and SKU systems to track items digitally on mobile devices, while others retrieve items from a printed pick list. Wherever your inventory system is at, NetSuite’s ERP inventory management features, including Bin Management and Inventory Counts, can integrate and improve warehouse practices and scale with your needs.

Inaccurate inventory reporting leads to inaccurate financial reports and demand planning. When employees pick items from inventory and enter that into the ERP system, however, it automatically records remaining quantities in real time. It also links data with related transactions in finance and updates the general ledger with accurate inventory values automatically, streamlining accounting and auditing processes.

Inventory levels are visible across other departments as well. Sales can access inventory levels while in the field to more accurately promise fulfillment dates and improve customer relationships, and procurement can be automatically alerted to purchase more items when inventory levels reach a certain threshold. This helps eliminate the guessing game of knowing when to reorder and minimizes out-of-stock (OOS) events that exhaust inventory levels.

Costs escalate quickly when stockouts occur and, if an item isn’t available, it can have a ripple effect on a company. Production schedules may need to be revised, leading to equipment changes, teardown costs, excess labor and more — not to mention dissatisfied customers who don’t receive their orders on time.

Improved Cycle Counts

The frequency of physical inventory cycle counts will vary depending on several factors. Key, top-tier products may account for only 15% of your total inventory and be counted monthly, while other items may only need a quarterly, bi-annual or yearly physical count.

An ERP can aid in your cycle count programs to maintain inventory accuracy throughout the year and help keep everyone organized by filtering subsets of items. It can even issue alerts when a part number or bin is due to be counted.

Once warehouse employees finish counting inventory, they enter those numbers into NetSuite, which automatically verifies and makes adjustments. Any significant discrepancies are clearly visible, prompting warehouse managers to dig into “why.” Are items being kept in the wrong bin number or mislabeled? Was a quantity of 5,000 put into the system initially when only 500 were on the purchase order? Was there excess scrap? Spoilage?

In the event an item’s count was depleted faster than anticipated due to poor quality and excess scrap, procurement can work with the vendor to address the issue as part of supply chain management. Organizing inventory in an ERP helps warehouse managers to remain proactive by getting ahead of inventory discrepancies and streamlining cycle count programs.

The Importance of Change Management

Technology solutions are often touted for their ability to automate processes and create efficiencies. While this is entirely true, providers often fail to outline the upfront work and organization that needs to take place to get to that point. In order to extract and leverage data, that data first needs to be input into the system and then maintained. I can’t stress enough the importance of working with a provider that can help your warehouse leads first understand how to properly organize your inventory in accordance with a consistent process.

Organizing part numbers, bin numbers and other factors associated with inventory levels and locations can first be done using a simple Excel spreadsheet. From there, you can easily import the data into NetSuite’s ERP system.

Even more important than getting the data into the system is getting your people on board to use it. That is why change management is so important. In addition to developing a system for organization and a clear plan for implementation, look for team members who can champion your ERP efforts and motivate others to adopt the technology. Being able to paint a picture of how their workflows will be streamlined and their overall job satisfaction will improve helps ensure success.

ERP Reduces Risks

Accurate inventory levels are often the backbone of production; people can’t make products without the parts. An ERP system helps organize warehouses and create efficient inventory practices. Instead of relying on tribal knowledge, every employee can understand the warehouse layout and how items are organized and accounted for.

Implementing an ERP as part of an organizational strategy benefits multiple departments, and it takes more than technology to make it happen. Having the right team to provide support and change management guidance leading up to the install, during go-live and afterward is the key to successful adoption. That’s the approach of the NetSuite certified consultants at Wipfli. Work with them to further understand how NetSuite’s robust ERP system can help with inventory management and other departments in your organization. Reach out today.

Author(s)

Reed Klinkhammer
Senior Consultant
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