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There are a number of different techniques employed by wholesale distributors to ensure their inventory control is maximizing efficiency and profitability. Below are six key techniques of inventory control for wholesalers and distributors of durable goods:
Management must decide the maximum and minimum level of stocks and supplies that need to be kept in the warehouse or across the network of warehouse locations. Management must also set optimized re-order levels, safety stock levels (below which supply must not be allowed to fall) and an average inventory level to ensure costs are contained.
Many organizations have an annual inventory budget and they are usually prepared well in advance before inventory is procured. Budgets should include the total cost of ownership to keep inventory on hand during that year’s account period. This includes materials cost, fixed operational costs, carrying costs, logistics costs, redistribution costs and additional miscellaneous costs that contribute to the total costs of ownership.
Also known as “the automatic inventory system”, this method is designed to keep a constant track of the quantity and value of each stocked item. Many wholesale distributors leverage a combination of an Enterprise Resource Planning (ERP) or Warehouse Management System(WMS) in conjunction with an Inventory Optimization solution, such as EazyStock, to optimize inventory balances. Most ERP and WMS technologies struggle to keep costs low and service rates high, which is why optimization software can be so valuable to operations processes.
4) Inventory Turnover Ratio
This is a calculation used to determine how quickly inventory is used up or “turned over” in a given time period. The higher the ratio the shorter the shelf life of the inventory and typically leads to higher sales volume and profitability for companies with lower profit margins. Inventory turnover should be closely watched for every item in the warehouse. Over the course of the product’s life cycle, demand will fluctuate and cause variability in the supply chain. Tracking demand patterns are one way to ensure product replenishment calculations are accurate and optimized.
5) Establishment of Optimized Purchasing Procedures
In order to ensure that inventory is under adequate control, management must adopt purchasing procedures that align with actual sales history and demand pattern data. All inventory items that have not had an inventory turnover or have not been sold within an accounting period, typically 12 months, should be classified as obsolete stock and should be liquidated from inventory to eliminate unnecessary carrying costs. Any item with a declining customer demand should be flagged in the system and its safety stock level thresholds and re-order point counts should be downwardly adjusted to mitigate risk of obsolescence and cost.
Vertical storage method is very good and space saving, Vertical storing is having no limit and sky is the ultimate limit. we can keep hi-reach fork lift and best safety methods can be adopted and go for vertical storage of goods.This will be space saving. And also 2 bin concepts is very good for C class items. Washers and bolts can stop manufacturing cycle and if continuous production areas if small C class items stop production means meaningless and hence 2 bin system can be implemented and we have done in TVS motor company and it was very successful
Optimization of warehouse is directly linked with operation requirement different type of warehouse (storage) techniques are used as per operation requirement warehouse is basically worked as the filter between two logistics operations, and logistics operation are classified based on frequency & volume normally external logistics operations where your received goods from vendors/suppliers are designed high volume & low frequency basis to reduce processing cost & transportation expenses. While internal logistics operation is designed normally low volume & high frequency methods to avoid WIP inventories in the operation & to use operation layout more efficient way. In these both logistics operation warehouse is worked as filter. i.e. input from external logistics & out for internal logistics. There are various way to developed warehouse you can use floor marking locations for bulk item storage, you can go for vertical storage techniques for medium & small size item , you can use fix location techniques you can use flexible location techniques, bar code system for real time system update & location tracking, digital picking system for skill constraint. All these techniques are support you to follow FIFO, low inventory storage, location control, improve picking & binning methods. In big logistics system cross dock operation warehouse is utilized for sorting items as well i.e you received items from different vendors & supply items to different customers both are high volume & low frequency operation. Some time with in internal logistics you use some temporary storages (sub-warehouses) where you handle high frequency & low volume at input & output as well similar like sorting of item in cross dock.
