Warehousing and Inventory Management - Essay Example

Warehousing and Inventory Management Executive summary This paper examines warehousing, which is a very important area of a business. First, it introduces the general aspects of warehousing. It discusses the modern methods of warehouse and inventory management. It then looks into the advantages of incorporating Information Technology into the whole process of managing warehouse operations. It highlights the case of Dart Warehouse, a certain warehouse that has benefited immensely from computerising its operations. Table of contents Introduction Proper management of a warehouse can help a business attain great heights. It is a very essential part of a business. The manager must adopt a warehouse management system (WMS) that best serves the interests of the company. A computerized management system is the best option. Any WMS must ensure an effective and efficient management of inventory. A WMS aims at controlling and storing of inventory in the warehouse. This process is closely linked to transactions such as putting away and picking, receiving and shipping. WMS also help in directing and optimizing inventory put-away based on real-time information concerning status of bin utilization. WMS usually make use of data capture facilities such as wireless LANs, RFID, mobile computers, and barcode readers. Data collection is followed by either batch synchronization or wireless transmission to a central database. This can then give useful reports about the status of inventory in the warehouse. WMSs aim at providing automated procedures of handling receipt and returns of inventory, modelling and managing logical representation of the warehouse, managing inventory within the store and enabling a seamless link to order processing. WMSs help in controlling the movement and storage of materials within a warehouse. They data-track inventory during production and interpret between existing ERP and WMS systems Warehouse operations management Warehouse management should be incorporated with the rest of the business to help in streamlining operations, reducing costs and speeding up order fulfilment. Setting up of a criterion to help in guiding the most efficient put away locations, bin quantities, and pick patterns is very vital in warehouse management. Any warehouse management practice should help in reducing bottlenecks and multiple handling. Materials handling information should be input directly from the warehouse to assist in reducing inefficiency and data handling redundancy (Frazelle, 2001). Pick and pack process in a warehouse should be automatically updated. This ensures accurate and timely fulfilling of orders and quickly responding to status inquiry. The warehouse management should decide on the sophistication level of their management system confidently. It should adapt to new volumes, technologies, products and processes with ease. It should also be at par with the growth of the business (Warman, 1971). Integration of other business operations such as manufacturing and order processing with warehouse helps in optimizing the layout, handling multiple orders, managing replenishment, and proper utilizing of space. The warehouse manager should incorporate various pick prioritization methods that include FIFO, FEFO and LILO into directed movement, pick and put away decisions (Frazelle, 2001). All credit or debit inventory records should be kept separate from sales, source documents and purchase receipts. This will help in maintaining accurate inventory records one when one needs to access records for display and testing among other operational needs. The warehouse manager should keep a visible inventory to help in increasing the efficiency and accuracy of management (Jenkins, 1968). To help in item tracking serial numbers should be used to help in determining where the products were bought, processed and sold. This will help in reducing waste and limiting carriage of expired stock via FEFO handling. Warehouse management involves understanding of product costs all through the production process that includes WIP and COGS. Costs should be broken down according to categories like overhead, subcontracting, capacity and materials. Control of closing processes should be tightened to help in improving batch job costing and its reconciliation with the general ledger easier (Frazelle, 2001). Distribution management should be controlled by categorising shipping agents basing on the services they offer. There should be an account for all the returned stock accounting for additional costs. Documents such as receipts, returns to vendors, replacement goods and credit memos should be automatically organized. The frequency of counting per unit of stock should be determined to help in increasing accuracy in inventory and meeting of shipping deadlines. Use of Information Technology in the warehouse The electronic commerce model has set the trend in how the world transacts its buying and selling of products. This has helped managers increase their profits and create many opportunities and benefits for their companies. Companies are increasingly trading on the Internet. Warehouses and logistical companies are realizing that they can get more opportunities and benefits by incorporating IT into their management practices. Although companies are doing their business on the web, their clients still expect whatever they order for to be delivered in good physical form to them. If warehouses do this well, they should expect nothing short of prosperity for their companies. Accepting and including e-commerce business into a company's operations provides an immense advantage to it. Dart Warehouse Dart Warehouse is company situated in Napeville, Chicago. About five years ago, this company owned three warehouses and striving to maintain profitability. Today, this company operates a large and profitable warehouse and serves many big corporations. This company is a good model of how warehouses need to operate in order to grow. Dart warehouse adopted cutting-edge software for running their company. This came after thru realization that the company required a robust system that could handle millions of clients. This technology reduced paperwork at the company and offered the warehouse a web-based visibility. It allowed them to start offering piece packing and picking for 'dot.com' companies. The new technology helped a great deal in maximizing the usage of the warehouse and provided them with a tracking visibility. They were able to know the location of every product in the warehouse at any particular time. Dart warehouse discovered that a warehouse that has no IT incorporated into its operations is not different from a commodity store. Taking part in e-commerce meant that they were accepting IT with all its benefits. This transformed them from being a commodity store to valuable business logistics Solution Company. IT adoption enabled the company to receive orders over the Internet. Currently, the company has a numerous ways of receiving orders. They include flat files and disks, modems, T1 direct lines, Internet and EDI. This has led to led to a direct increase in business from corporations seeking to fulfil their logistical needs. Moreover, order accuracy has increased to about 99.99 per cent. Human data input has been reduced by 75 per cent. Error probability has therefore been reduced to 1 in 5 million from the 1 in 300 earlier on, since scanners have now been adopted. Volumes have gone up but the general labour costs have come down by nearly half. Modern methods of inventory management Warehouses usually handle large kinds of numbers. It is therefore imperative to have an effective and efficient inventory control system. It is a must for large warehouses to have such inventory management systems. Smaller companies are also making use of these kinds of systems. These systems help in ensuring that customers always get whatever they want while the warehouse keeps as little stock as possible. Mismanaging inventory results to too much money tied up in the warehouses and disappointed customers. Factors like nature of the big-box store of the warehouse, multinational production contracts, proliferation of products and quicker production cycles make modern inventory management necessary. Modern warehouse management systems must be able to receive and incorporate data like seasonal demand, communicate with suppliers in real time and track sales and available inventory. Additionally, they must be flexible, to allow for a merchant's intuition. They must tell the warehouse owner the best time to re-order and the amount of stock to purchase. In order to achieve this, warehouse management systems must incorporate numerous technologies into one approach (Baker, 2006). Initially, warehouse owners used to write down their purchases or simply looked at the number of units that have been bought at the end of the day and tried to forecast the future needs. Here, intuition and experience were vital skills. However, this method was still not exact even when applied in small warehouses. As the warehouse management systems advanced towards automation, the machines were then capable of generating billing records and managing inventory. The system was initially too costly to use but better systems came into place to replace it (Jenkins, 1968). Recently, another technology to track inventory is being used for managing factories, warehouses and stores. RFID makes use of microchips in transmitting product information like serial number, manufacturer and type. It is better than bar codes in numerous ways. For example, a scanner can read the RFID information from some distance (Baker, 2006). Vendor-managed inventory is another common warehouse management system. In this system, the vendor keeps the products on a warehouse's shelf. The retailer and vendor work together in share proprietary information. This system allows vendors to ensure that their stock is properly displayed and available and helps in putting them in contact with its sales data and the retailers. The feedback received by the vendor can help in marketing, research and development. Essentially, all warehouse management systems work the same. First, bar codes or RFIDs the goods the consumers are buying. The computer software then helps in interpreting the numbers from the bar codes and matching them with the kind of goods they represent. The merchant is therefore able to track sales and inventory. This can be done through a scanner or at the checkout counter. This keeps the store abreast of the items that are selling and which ones are not. Specialized software helps in keeping track of the amount of stock leaving the warehouse through purchases and how much remains in the warehouses and on the shelves. This gives the mangers a true picture of what is really going on. This software also does the analysis of the data and recommends strategies for reordering. They are sometimes programmed to make automatic orders at some points. However, good systems must also allow for human decision making. The systems should only provide the necessary information but leave the manager to make the final decision (Baker, 2006). Once the manger makes a re-order decision, this system uses electronic interchange for communicating its requirements for more products to a vendor. The data is stored in the computer and can be accessed by the management of both the vendor and retailer (Smith, et al 1998). Inventory management systems provide vendors and retailers numerous advantages. However, it also has its demerits as well. Since this system aims at keeping the stock at a minimum, retailers can be caught off-guard should an item sell too fast. This therefore calls for buffer stock to avoid such an occurrence. These systems can also be affected by software failure and computer crash (Smith et al 1998). Some consumers have opposed the RFID technology. They claim that it invades their privacy since it provides additional information about their personal data and buying habits. Their argument is that this information could be used for pushing other products on individual consumers. RFID signals can undergo collisions with each other and make accurate readings very difficult (Baker, 2006). Conclusion Effective and efficient warehouse management is indeed very important for a business. Automation of this process will go a long way in providing the business with many opportunities and benefits. This will lead to greater profitability as well as reduction of costs. All warehouses should therefore incorporate Information Technology into their operations. References Baker, P et al (2006) The Handbook of Logistics and Distribution Management, Kogan Page Publishers Frazelle, E (2001) World-class Warehousing and Material Handling, McGraw-Hill Professional Jenkins, C (1968) Modern Warehouse Management, McGraw-Hill Smith, J et al (1998) The Warehouse Management Handbook, Tompkins Press Warman, J (1971) Warehouse Management, Heinemann Read More