Anyone else fascinated by the TV show, “Formula 1: Drive to Survive” on Netflix? I am. And it’s not because I’m a race fan (I’m not). I am drawn to the scale of the Formula 1 racing circuit. It’s amazing. The drivers’ skills are unworldly. They are all best in class with some better than others and everything needs to click. Kind of like managing inventory in your warehouse. The scale may not be as grand but the need for everything to work correctly is the same.
Poorly managed inventory will cause stress in the operation between departments. In the extreme it can cause total failure. Here are some things you might be seeing with poorly managed inventory:
- Failures in on-time shipping driven by delays in finding inventory in time to make shipping commitments
- Loss of sales from inaccurate or missing inventory leading to disappointed customers who may go elsewhere (and might not come back)
- Cost overruns from inefficient processes caused by working around poor inventory positioning
- Inaccurate financial reporting
Developing a robust inventory control process is not hard. Yet it does require two things:
- Operational discipline by all the teammates that touch inventory
- Reporting to keep the inventory strategy fresh and supporting the goals of the organization
Think of it like leading a team to win a Formula 1 race.
The design of the car is critical, just like designing your inventory control process
While there is consistency in the mechanics, some variation is allowed. Designing an inventory control process has some basic steps that can be modified based on business needs:
- Label all inventory clearly
- Use consistent units of measure (i.e., a case of 10 is always a case of 10)
- Match physical inventory to the financial system of record
- Have a count system – cycle count or physical inventory
- Use logic to decide how inventory is positioned
- Develop a method for quickly updating transactions
Ask yourself these questions:
- Is FIFO (First in First Out) needed?
- Is a replenishment strategy needed?
- Does cross docking need to be accounted for in the process?
- Do bulk locations need to be counted?
Flawlessly navigating the track can cut critical seconds from the driver’s race time
Investing time to construct an optimal flow of material in the warehouse will reduce unneeded steps. It also decreases the opportunity for errors with that reduced handling. Having inventory in the best location for picking will enable an efficient service model. Depending on the unique characteristics of your business, crossdocking, bulk locations, velocity zones, or overpack operations may be needed.
Just as a race team looks for opportunities to maximize their routing around the track, inventory management needs to be included when designing the material flow in your warehouse. Make sure all the corners are navigated, but no corners are cut.
During a race, pit stops need to be flawlessly executed to keep the car competitive.
The replenishment logic and smooth execution of inventory moves will keep pickers executing without waiting time. Slotting logic will keep required levels of stock in the picking locations, limiting the need to stop picking to replenish inventory needed to complete the orders.
You can’t plan for everything. An emergency pit stop will be needed at times and emergency replenishments will have to occur. Both need to be executed efficiently and without error. Track your emergency replenishments. Do a root cause analysis and correct the reason that drove the need to urgently replenish stock.
Analysis will help resolve the need for unplanned activity in the future. Planned pit stops and planned replenishments can keep the team on track to win the race. Having the staff to quickly correct the unplanned actions will also help put the team in a winning position.
The driver is in constant communication with race control, monitoring the car’s performance and giving information to help the driver best navigate the track.
Inventory performance needs to be monitored and corrections need to be made quickly to head off bigger issues and keep the team in a position for success. Here are a few tips:
- Cycle counting will keep the systemic and physical inventory coordinated. Location accuracy audits monitor the correct inventory in the correct location. The systemic and physical locations are the same. Corrective actions can be taken to determine process gaps and correct the root cause issues.
- Emergency and triggered replenishments can be evaluated to adjust the slotting plan and reduce emergency activities that interfere with the picking process.
- Fill rate data will reveal if customers are being shorted either due to picking execution or hidden inventory issues.
As the race to satisfy the customer goes on during the day, the critical factors to success need to be monitored. Corrections can be made that keep the team competitive in crossing the finishing line that day. That same data can be used to fix root cause process issues and improve the ability to compete at the highest levels.
In the end, the skill, the training, and the discipline of the driver determines the effectiveness of the excellent design, processes, and controls the team has put in place. Feedback from the driver gives the crew information on how the car is performing that may not be visible to them.
Likewise, the warehouse is dependent on the operators following a process and providing feedback on better ways to execute tasks while still following the established instructions until adjustments can be made. It is important to understand that inventory control associates often need to operate at a higher level than their counter parts in other areas of the warehouse. Being successful here has a few key components:
- Provide thorough training – make sure the inventory team is competent in their tasks and understands the overall warehouse processes
- Stress the importance of pristine inventory as the foundation for a high performing organization
- Help the inventory team set the pace in the building for process discipline – if they cut corners, that opens the door for others to do the same
- Reflect their higher understanding/discipline in their compensation
The execution of the team closest to the process, the driver in a race, or the associate in the warehouse will make or break the success of the team. You need the right people in those jobs that are well trained and disciplined to follow the plan all the way across the finish line.
At the end of the Formula 1 race the three top teams get to the podium.
Those teams that won had the best design, managed the track the best, made the most of their pit stops, had smooth collaboration between the crew and the driver, had a well-trained associate behind the wheel with the needed skillsets, and followed the process. Getting a warehouse to best-in-class performance requires using inventory strategy as the foundation for success:
- The incoming inventory needs conformance rules to support a robust inventory control process.
- The inventory material flow in the building needs to be designed to optimize the inventory profile, the physical layout, and any automation.
- Slotting and replenishment logic will keep the “car on the road” in your warehouse without unnecessary stops.
- All the processes need to be monitored.
- Variances need to be resolved promptly.
- Root cause analysis needs to be used to close out process gaps, which will increase speed throughout the warehouse.
In a warehouse, inventory is the lifeblood. Managed properly, warehouse leaders can use inventory control as a competitive advantage in creating a best-in-class warehouse operation. Inventory ignored or managed improperly creates service issues and interdepartmental friction, drives excess costs, and contributes to inaccurate financial reporting.
Be like those high performing teams focusing on design, strategy, course correction, and performance monitoring. Create a professionally trained and motivated staff. You will create a winning culture and a smooth inventory management machine that drives success for you and your business, every day.
Dave Haley, Customer Success Executive, brings over 25 years of operations leadership to Open Sky Group. Dave’s focus is optimizing our client’s operations through process improvements, system upgrades, or automation solutions. Open Sky Group’s mission is to deliver solutions that allow our customers to achieve more, often with less, while having the flexibility to adapt to change. Dave lives that mission focusing on solutions that improve warehouse and transportation performance, with or without technology, and provide the best results for our clients. Dave also works in concert with Open Sky Group’s Sales and Marketing team developing content, analysis, and commentary.