Published on: September 11, 2013
Inventory accuracy is crucial for those in the distribution sector. The lack of inventory accuracy is a major problem for many distributors and needs to be addressed. Inaccuracies occur when the quantity of inventory on the warehouse floor does not match the records in the warehouse management system (WMS). These inaccuracies can lead to longer order process times, frustrated customers, and more complications in the future.
A warehouse management system should provide more inventory accuracy functionality than just making sure the numbers match. Here’s a list of features that should be expected from your warehouse management system:
- Obsolescence: What is the value of obsolete inventory? This reporting assists with the determination of how well an organization manages its inventory and how accurate the existing demand forecasts are. Perhaps product quality is poor. A WMS system should help make this type of assessment.
- Margin Analysis: What price are products being sold for and how much profit is made per sale, per item, per customer? Critical information in terms of evaluating sales teams and inventory.
- Value: What is the value of inventory at any point in time? How much of the companies resources are currently tied up in inventory?
- Landed Cost: The true cost of any product in inventory includes the cost of the product plus other items like shipping, brokerage, duty and freight. These costs should be allocated and calculated automatically when receiving inventory.
- Inventory Turns: The ratio between the annual cost of sales and average inventory value. Generally, the higher the number the better. This usually indicates the company has strong cash flow and minimal inventory obsolescence or shrinkage.
- Customer Shipment Date Tracking: Customer satisfaction is the key to any company’s success and ensuring you meet the customers required shipping dates ensure this. A WMS system should allow the tracking of shipment dates made and missed and should include a way to remind the shipping department that an order is due for shipment.
- Shipment Return Tracking: What products are being returned and which customers return products and how often? Are returns due to shipping or pricing errors? This information is critical in terms of customer relationship management as well as shipping and purchasing management.
- Fill Rate for the Initial Shipments: Relates to item two, but what is measured is the company’s ability to fulfill shipments with the inventory on hand without back orders. It is also important at this point to measure the shipment met all other quality criteria the customer has.
- Top Customers: Who are they? What items are they buying? Are they making repeat purchases? How often are they buying? This reporting can provide extremely valuable information to the sales and marketing departments.
- Supplier Shipment Dates/Fill Rates/Shipment Returns: See 2, 3, and 4 in the customer service section but now the reporting is evaluating suppliers and their ability to meet the company’s purchasing expectations.
- PO/Invoice Cost: Is the cost per the invoice from your supplier the same as the cost of the original purchase order. If there are differences a company should be able to make that analysis to allow follow ups with the supplier for explanation.
If your WMS does not provide this fundamental information it is not providing appropriate value and may need to be evaluated. Not sure where to start? Give us a call today! We can help guide you through the warehouse management system selection process so you can ensure that your inventory is always accurate.