Best Practices for Inventory Management in Large Warehouses

Inventory management – keeping near-real-time track of every item in stock – is involved enough in a small business with, say, a 50,000-square-foot warehouse and a relatively low number of products. But the game becomes quite different once you’re in the midsize or enterprise range, with thousands of SKUs in play from multiple suppliers.

In a large warehouse covering hundreds of thousands of square feet, with active and reserve storage, a large staff, and thousands of stock-picking locations, the need for a high degree of inventory accuracy increases exponentially. Poor warehouse inventory control in that scenario sets up a domino effect, adversely impacting order flow, causing late deliveries and lost business.

Large Warehouse, Large Problems: Challenges in Improving Operational Performance

There is no lack of external headwinds that can affect the performance of your warehousing and inventory management. The past three-plus years have demonstrated how vulnerable individual companies and the overall economy are to large supply chain disruptions. Also, the transportation picture has grown more problematic, with more carriers and even large freight brokers going out of business.

In addition to these macro challenges, let’s look at three other main issues acting as a drag on effective warehouse management and operational performance within the four walls.

Difficulty of Maintaining an Effective Workforce

Labor shortages and high turnover rates are not a news flash in the warehousing sector, but they are an evergreen problem that has worsened. Some operations executives report a 10:1 ratio of hires to permanent associates. Of those who stay, many often jump to another job nearby for 50 cents more an hour in highly competitive markets.

This labor shortfall causes a variety of problems, according to Yikun Shao, B2B North American supply chain leader for Alibaba.com, in Harvard Business Review. “Understaffing in logistics areas could lead to delayed shipping, delayed port loading and unloading, shortages of truck drivers and inventory stock-outs, difficulties in fulfilling customer orders on time, and a variety of other challenges,” Shao said.

Lack of Automation and Technology Integration

The case for automation and robotics in warehouse fulfillment operations seems an easy one to make. Labor is tight and expensive, and demand for rapid order fulfillment and delivery is not abating.

Yet despite the buzz around highly automated mega-players like Walmart and Amazon, most large warehouse operations remain largely manual affairs. According to Modern Materials Handling, 90% of operations in 2022 had no automation at all. But those using it are seeing benefits; 85% of chief supply chain officers said they plan to increase their investment in robotics and automation.

A separate issue is the lack of API or EDI interfaces between warehouse systems like WMS and WES, OMS and e-commerce platforms, and enterprise software (ERP and CRM). Without it, systems can’t properly “speak” to each other, making it virtually impossible to automate any workflows that rely on cross-departmental collaboration.

Poor Visibility Into Inventory Status and Location

Without reliable inventory visibility in near-real time, major warehouses are much more prone to delayed orders, more out-of-stock notifications (the death knell for customer loyalty), and higher discount rates, especially with seasonal merchandise. Items can also become misplaced or even lost using outdated systems and processes.

In retail especially, but in other verticals as well, warehouse managers are still recovering from the prevalent “just in case” approach that led to massive overstocks still being worked through. This happened via the infamous “bullwhip effect” of over-ordering to hedge against supply chain disruption in 2021 and 2022. Companies are now taking more of a balanced approach that skews more toward “just in time” ordering.

For all these reasons, warehouse managers are looking for a better handle on where all their products are and what the stock levels are at any given time.  According to a 2023 merchant survey from UPS logistics unit Ware2Go, 44% of respondents said they’re looking for real-time inventory visibility. Also, 35% of merchants said they needed greater insights into fulfillment and delivery statuses, and 33% wanted insights into their customers' geographic location and buying patterns.

Businesses Demand Innovative Warehouse Management Solutions

In a fiercely competitive environment, where customer loyalty is only as strong as the on-time rating of the last order, businesses need to improve all aspects of warehouse management to grow. This includes stepping up order fulfillment efficiency with innovations like warehouse execution software and automation storage and retrieval (AS/RS) systems.

Inventory management needs to focus on a rapid replenishment approach for fast-moving SKUs and “smart warehouse” tools leveraging Internet of Things (IoT) sensors to keep a real-time handle on stock levels and locations.

Growing businesses need to expand into more and larger warehouses to handle increased customer demand. But your operations can also be a chokepoint if current capabilities are behind the times. Integrating a series of best practices ensures your warehouse operations are a vital asset rather than a liability.  

5 Best Practices for Large Warehouse Inventory Management

Any approach to improving your warehousing and inventory management should be built upon a foundation of responsiveness, adaptability, and a continuous improvement mindset. Look for an experienced partner who can help optimize your existing space, including upgrading layout design and workflows, and leverage predictive analytics to improve forecasting and replenishment.

The following are five key areas that will act as pillars upon which to build a solid warehouse operations improvement plan that will achieve measurable results for your business.

1. Workforce Management

A 2022 study from YouGov, commissioned by Safety Culture, found that more than half of frontline workers were willing to leave their field if something else presented itself, indicating a high level of dissatisfaction with these critical positions at a time of low unemployment.

An effective workforce management solution will help you address various labor-related challenges. It offers a reliable, trained workforce, helping you overcome staffing shortages, enhance operational efficiency, and maintain seamless warehouse operations. This will remove the constant struggle of staffing up and down, providing you with a reliable, flexible workforce trained on processes in your warehouse or even in a partner facility.

Also, a 3PL-provided workforce management program lets you implement a fixed-cost labor program that provides a greater degree of predictability in operational expenses, especially critical during seasonal peaks.

2. Digital Warehousing

In a large warehouse, relying on paper-based, manual systems introduces all kinds of issues in your operations. Hand-keying source documents leads to data entry errors from handwriting that’s either illegible or misinterpreted. Using handwritten documents and manual keying causes an error rate of a couple of percentage points. It may not sound like much, but when extrapolated out over thousands of orders a day, the financial impact of inaccurate inventory figures is significant in terms of missed orders and out-of-stocks.

Going paperless with barcode scanning, on the other hand, is 99.9999+% accurate. Barcode scanners, on average, cause one error for every 70 million pieces of scanned information.

Using paperless processes in a large warehouse reduces manual interactions, minimizes errors, and improves overall efficiency. Digitizing your operations enables real-time updates and enhances data accuracy.

3. Inventory Tracking and Reporting

As noted above, a high degree of inventory visibility is an absolute necessity for large warehouse operations. How can you successfully process orders, get the correct items out the door on time, and keep customers satisfied when you don’t have a firm grip on the location of every item at any point in time?

Fortunately, many outstanding tools and experienced partners are available to help you track, manage, and report on inventory levels and movement across the supply chain.

These solutions can provide enterprise-wide, SKU-level visibility that enables precise tracking. With this capability in place, inventory management is enhanced by reducing errors, preventing overstocking or stockouts, and ensuring accurate fulfillment.

4. Slotting Optimization

Optimizing your slotting is an important capability in any fulfillment operation, but it becomes especially critical in a large warehouse. The bigger the facility, the greater the potential for associates to spend most of their time walking miles per day to pick items in an order.

You can significantly boost productivity using customized warehouse layouts and workflow designs for everything from storage systems to order-picking routes. This helps ensure greater space utilization, generating a greater ROI from your warehouse investment without sacrificing efficiency.

5. Demand Forecasting and Inventory Replenishment

These two key disciplines go hand in glove. Having an accurate demand forecast helps you optimize both your replenishment and space optimization strategy. Proper space is allocated for incoming stocks at the right levels and locations to turn incoming orders quickly.

If your monthly or quarterly forecast is off by even a few percentage points, you end up either unable to fulfill orders for in-demand items or with inventory overhang and carrying costs that exceed your budget. This also dominos throughout your operations, affecting your replenishment, space utilization, slotting and staffing plans, etc., throwing them all off kilter.

Look for a trusted industry partner that leverages predictive analytics to drive insights that inform an intelligent demand forecasting approach. Also, having a good ABC inventory classification system, placing each SKU in the right priority bucket, plus reliable lead times from suppliers, helps create a solid replenishment schedule.

To Optimize Inventory Management in a Large Warehouse, Think Big

Innovation is the watchword that enables organizations to build effective operations in large warehouses. You can’t accept the status quo and expect to succeed in a highly competitive, uncertain environment.

With Productiv, businesses can leverage both technology and expertise to create effective inventory management strategies demanded by a high-stakes inventory environment.

Large Warehouse Needs Require an Innovative Approach

All of the challenges cited above require an innovative approach and fresh thinking that doesn’t just maintain the status quo but delivers measurable results. Standing pat isn’t a great formula for success.

Productiv offers an array of state-of-the-art technologies, proven methodologies, and a deep bench of industry experts who take a consultative approach to crafting the ideal solution for your large warehouse needs. From inventory management, kitting and assembly, labor management, layout, and workflow design to fixed unit cost pricing and efficiency-driven operating cost savings, Productiv is your one-stop shop for next-level performance. Speak with one of our experts today.

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