Inventory management is not as simple as many think. To keep track of things properly it's important to bring together processes, data collection, systems and people.
In the wrong mix, businesses have seen stock discrepancies arise leaving them unable to understand where and when things were placed and sent from, over replenishment orders and poor visibility of stock across multiple spaces.
Knowing where and how inventory data can easily go wrong is important because it tells us what methods to apply to make it right again.
Let's take a simple look at why inventory data gets inaccurate,
what tools to apply in order to improve inventory tracking,
how inventory tracking fits in with the business's core systems, and how to
actually measure if improvements are happening in inventory management.
- Why Inventory Information Goes Wrong
Inventory inaccuracies can begin anywhere in the process, with discrepancies usually stemming from a lack of good processes or training. This happens in:
Inaccurate receipt recording
Movement of inventory without record
Missing picking/shipping scans
Multiple systems holding different inventory information
Conducting stock counts incorrectly or too infrequently
A system is only as good as the processes that back it up. Technology can help businesses collect the scan data, but it's important that consistent receiving, movement, counting, and shipping practices are in place as well
- Barcode Vs RFID Technology in Inventory Management
Barcode scanners and RFID readers are commonly used in inventory tracking. Barcodes require a reader to scan a mark, while RFID's use radio signals to interact with a chip.
The RFID reader can pick up a signal from multiple tags (depending on the tags and reader), meaning that multiple items can be read without scanning them individually. RFID is then sometimes preferred over barcodes for speed and range, while barcodes are used often for receiving, picking, counting, and shipping.
In general it's important to remember that neither option is superior - each has its benefits and drawbacks depending on the type of inventory tracked, hardware, technology, space and other variables.
- Bringing Inventory Tracking Into Business Systems
A tracking system can only provide value to a business through consistent processes.
Many businesses operate by having a receiving department log stock, have warehouse staff move products, count cycle-counts or entire warehouses, and ship items with shipping staff. Usually, the tracking system (whether it's RFID, a barcode system, or another software) is used to capture data about when an item physically moves.
However, many systems also support software integrations. This means that once a person has picked up an item in a warehouse, another person can take that item through order fulfillment processes.
By integrating tracking systems with WMS, ERP, MRP or Order systems, companies reduce manual data entry and potential inconsistencies across systems.
In any case, it's important to note that business processes must be in place to capture all relevant data, and that procedures and technology must work together smoothly for the best results.
One way of ensuring that processes support the required results is in developing and applying relevant inventory management Key Performance Indicators (KPIs). In simple words, these tell us if our current processes are producing the results we desire.
Some inventory-related KPIs include:
Inventory record accuracy (IR Accuracy)
Inventory turnover
Stock-out rate
Receiving accuracy
Pick accuracy
It's important that businesses develop these processes for their own inventory and supply chains, and that they have a baseline measurement. That way, they'll know if newly applied systems and processes have improved things or not.
- Building Something Better Begins With Understanding What We Have
Improving an inventory process doesn't have to mean changing everything there is at once. Businesses should begin by reviewing and learning exactly what they have in terms of processes.
In an ideal scenario, they will then identify discrepancies, review where things go wrong with tracking and begin testing changes. Testing should take place with one set of items and/or one group of people before going wider. Businesses should assess how scanning worked out, if all transactions went smoothly, how much adoption took place, the integrations' performance, and how much extra work (if any) was needed to support the improvements.
After a successful test period businesses can then take their changes wider, applying them to different items and/or more group of people.
Businesses looking to change their inventory tracking should take a look at The Inventory Master to learn about inventory management and solutions.
- Final Notes: Getting Inventory Right
Inventory management solutions require disciplined people, solid data collection processes, the right systems, and proper inventory software. Barcode scans, RFID tags, inventory software, and other tools help companies track products down at scale, but they all require proper implementation if businesses want to benefit from them.
By knowing where discrepancies begin, and what processes yield consistent and accurate data, businesses will be able to identify exactly what they need in order to create reliable inventory management and increase process efficiency. All changes then become easier to implement and measure.
Discussion: What has been the most challenging aspect of inventory projects you've taken part in - data accuracy, hardware, software, or processes and people?
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