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  • Pete Conrad
Right materials on-hand?

Inventory Management

Within the walls of a manufacturing or distribution facility, lots of things can change that will drive productivity down.  It’s a constant battle to maintain throughput standards.  A big factor that influences warehouse productivity is inventory management, particularly classification and storage profile.  Our take on improving your warehouse workforce is in a previous blog post – Building a Better Workforce.

Inventory Classification

When it comes to maintaining inventory – whether input materials or finished goods – do you know if you have the right quantity in the right place?  To work towards an answer, one needs to have an understanding of how vital each item or material is to the operation.  Generally, inventory is classified into four buckets based on service level:

A – 99% service level (critical items that will shut down your facility or the customers):  always have on-hand, no more than 2% of items

B – 90% service level (high volume materials or items): 18-20% of the materials that comprise the remainder of items up to 80% of demand

C – 70% service level (medium volume materials): next 30% items or materials that comprise the next 15% of demand

D – less than 70% (low volume materials):  next 50% of items or materials that comprise the next 5% of demand

A Pareto analysis is the proper approach to classify inventory into the above buckets.  Once the items are classified, the inventory manager now knows where to focus his attention:  the critical and high volume items that are 80% of the demand.  This inventory classification will drive decision making on amount of material items on hand, cycle counting, and storage position within the facility.

Storage Profile

The last people to know product changes are coming are usually the warehouse operations team.  This information is critical for the team to keep the warehouse at performance standards.  As the product mix changes, the impact will affect storage density and layout – two key factors of inventory management.  Storage density will decrease if the new products do not stack well on the floor.  If a new product only stacks two pallets high instead of three on the floor, then the facility lost 33% of its floor storage capacity.

As the floor stack height decreases for the pallets, the warehouse will need more storage positions in racking, which is a big investment in capital and time to reorganize the warehouse.  An average stack height approaching three usually means that floor storage will be an effective solution; however, an average of two or less means that racking will be required to efficiently utilize the space.

In terms of warehouse productivity, the wrong storage profile will mean the product sits on the inbound dock longer because no locations are available for putaway.  This will tie up inbound dock and back up yard as trucks cannot be unloaded.  Additionally, the wrong storage profile could be increasing travel time for the high volume items by 20% or more.

Recommended Approach

First step is to tackle the inventory analysis, and the second is to implement the identified changes.  The Pareto demand analysis could really be eye-opening to see what items are driving demand.  The information will lead to better inventory management and application of effort.

Veryable is the on-demand platform to find flexible labor to perform cycle counts or backfill your people to perform the counts.  In this labor market, getting the most out of your workforce is a key driver to success.