Over the past three months, we have discussed the advantages of implementing warehouse management systems. This month we will explore how a WMS (warehouse management system) can help maintain an accurate inventory.
It is critical that the quantities of an item in a distributor’s computer system agree with what is physically in the warehouse. Losses from inaccurate on-hand quantities include:
• Time spent looking for lost material
• Time spent running out to the warehouse to physically check that a specific quantity of a product is available rather than relying on the quantity displayed on the screen of an inventory inquiry
• The cost of replacement material that must be ordered to replace quantities of products that were lost or simply disappeared from stock
Because WMS systems require that material is “scanned” into and out of each location, the chances of material being lost or misplaced are greatly reduced. The system “knows” where every piece of every product is located at any point in time. But WMS systems also allow distributors to quickly and efficiently ensure that on-hand quantities remain accurate through comprehensive cycle counting programs. Cycle counting is the process of counting the on-hand quantities of a specific number of products every day. Various WMS systems feature different cycle counting methods:
Rank Based Cycle Counts – Every time someone goes to a bin to fill an order, there is the chance that a mistake will happen. For example, the wrong quantity of the product may be removed from the bin location. Indeed, those items in your warehouse with the most accurate counts are probably your slowest moving products and dead stock. In a rank based cycle counting program, the WMS system will identify those products that experience the most activity and automatically schedule these products to be frequently counted. High-value products and products with a history of count discrepancies may be added to the group of products that is counted most often.
Random Based Cycle Counts – There are unfortunate circumstances where management suspects employees of theft. One of the best deterrents of inventory pilferage is to randomly count products. If a dishonest employee doesn’t know what products will be counted on a specific day, he or she will be less inclined to steal material. Most WMS systems include several methods to randomly selecting products to be counted.
Continual Cycle Counts – Distributors do not make money cycle counting products. Cycle counting is an expense of doing business. Continual cycle counting incorporates count verification into the order picking process. The WMS system monitors when there should be a low quantity of a product in a bin after a quantity to be picked has been removed from that bin. The WMS system then requests that the order picker verify the remaining quantity in the location before proceeding to pick the next item on the order.
Regardless of the method(s) chosen, the process of continually verifying inventory accuracy through a WMS cycle counting program provides a more accurate inventory at a lower cost than a traditional full physical inventory. In a full physical inventory, normal operations are suspended while all employees try to count all of your items in a limited amount of time. Overtime costs and lost productivity due to the shutdown increase the distributor’s costs while hampering customer service.
Next month, we will show you how to determine if implementing a WMS system is worth the investment in time and money. In the meantime, please let us know if you have any questions.