10 Ways to Improve Your Warehouse Inventory Management

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The warehouse inventory management systems that you put in place will determine the success of your eCommerce fulfillment operations. One winning strategy is outsourcing your warehouse management to a 3PL services partner. When you put your fulfillment in the hands of logistics experts, you immediately increase the quality of your order fulfillment. However, whether you run your own warehouse or outsource to a 3PL, your understanding of warehouse inventory management is critical to managing your supply chain. 

Here are 10 ways to increase efficiency and improve your eCommerce operations by leveling up your warehouse inventory management.

Warehouse inventory management

1: Treat your inventory management software like an investment in your business — because it is.

The key to running an efficient supply chain is knowing where to cut corners and where to invest. Inventory management software is critical to the smooth operation of your business. You don’t have to buy the most expensive warehouse inventory management solution, but you do need to invest time. The time it takes to test different software, ensure that it’s properly installed and integrated with your other eCommerce solutions, and train your staff to use it correctly is an investment in your company that will pay you big dividends.

If you work with a 3PL, the fulfillment center will use a warehouse management system (WMS) to track your inventory as it moves through the warehouse. However, you still need inventory management as part of your ERP package so that you can collect and analyze inventory data. That information is essential to develop your inventory strategy, refine your product line, and reorder stock in time to avoid stockouts.

warehouse picker fulfilling oversized product order

2: Adopt a warehouse management system that provides real-time inventory tracking.

Whatever warehouse inventory management software you choose, make sure that it gives you real-time tracking data. Your stock is constantly in motion, and you can’t afford to be a day or even an hour behind. 

Online sales can be volatile. Real-time inventory tracking helps you match sales volume trends to your stock on hand and update your inventory forecasts. Quick pivots are essential to eCommerce supply chain management. 

When you use a 3PL, your warehouse integration is a critical factor in the speed of data transmission. You can integrate through a plugin, middleware, or a custom API. A plugin is the easiest way to make a real-time connection between your online store and your fulfillment warehouse. If a plugin isn’t available, middleware offers a fast setup but may introduce lag time in data transfer. A custom API takes time and money to build, but it may give you the most robust, fast, and flexible connection to your 3PL’s WMS.

warehouse Inventory management

3: Rely on inventory management software, but verify with detailed receiving processes, regular cycle counts, and physical inventories.

Your real-time inventory data is only helpful if your inventory counts are accurate. There are several additional steps necessary to ensure proper inventory control.

Accurate stock counts begin at the receiving dock. Some warehouse operations teams simply enter data from the bill of lading into the warehouse management software and move merchandise to the shelves. That can speed the receiving process, but it can also introduce errors into warehouse inventory systems. A best practice is to do a physical check of every inbound shipment against the bill of lading to confirm that all listed SKUs are in the container and none of the products is damaged. 

Shrinkage can also make it hard to manage inventory because you don’t know if SKUs listed as in stock in your warehouse management software have disappeared from the shelf or gotten damaged. Shrinkage may happen at any point in the supply chain, but a well-run warehouse should have a shrinkage rate of 1% or less.

Barcode scanners or RFID chips can help you track inventory movements and reduce human error.

Regular cycle counting serves as a check on your inventory control systems. Cycle counted SKUs assess the effectiveness of your inventory control at receiving and your shrinkage prevention measures. Companies should perform cycle counts, which don’t interrupt the flow of orders, on a rotating basis.

A complete physical inventory may seem daunting, but it is essential to proper warehouse inventory management. If you have a 1% inventory error rate per year, failing to find and correct the errors will give you a cumulative and growing inventory error rate. That can affect every aspect of your business, from order management to setting stock levels.

Pick a slow time and do a full stock count at least once a year.

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4: Track personnel and fixed assets using your WMS.

Use your warehouse management system for more than managing inventory that moves in and out of the warehouse. Leverage your WMS to help improve processes and run a more efficient warehouse. 

You can also use warehouse management software to improve your warehouse design. By identifying best-selling items and placing them closest to the packing station, you can improve efficiency and save money on picking and packing.

A superior third-party logistics provider already has systems in place for efficient operations. You don’t have to train, manage, or deploy warehouse staff. And your 3PL will determine the most efficient warehouse layout for pick and pack fulfillment. That leaves you free to focus on building value in your supply chain and increasing customer satisfaction. 

pick and pack warehouse services

5: Use your warehouse inventory management system to analyze and upgrade picking methods.

When you transmit an order to your WMS, it generates a pick list. The pick list tells the picker how to pick the order. It includes a quantity and location for each SKU.

There are many different strategies for order picking. Your picking strategy can significantly impact total fulfillment costs and overall efficiency. Small eCommerce companies often keep warehouse operations simple, using piece picking to pull the items for one order at a time. A third-party logistics company will use one or more bulk picking methods to reduce costs for picking individual orders. 

Bulk picking methods include:

  • Batch picking: Warehouse workers pick batches of orders together. Batches are created from orders with overlapping SKUs.
  • Zone picking: Each picker stays in a warehouse zone, picking SKUs from that zone and then passing the order to a worker in the next zone to continue picking it. In large warehouses, zone picking is essential to efficient operations because it keeps pickers from walking long distances to fill a single order.
  • Wave picking: This method combines batch and zone picking. A picker works a batch of orders in their zone, then passes the batch to the next zone.
Red Stag Fulfillment Inventory Management

6: Leverage data to determine if JIT or JIC is your best inventory management strategy.

The pandemic exposed the fragility of global supply chains, making just-in-time inventory management impractical for many companies. Some enterprises turned to a just-in-case model, stocking up against supply chain disruptions. But the JIC model has downsides, leading to higher storage costs, overstocks, and aging inventory. 

In this environment, comprehensive warehouse inventory management is crucial. Demand planning is more challenging, but you can leverage your inventory management software to provide reporting and data analysis to help you set maximum stock levels and determine realistic reorder points.


7: Skip the shelves and use cross-docking to move backorders quickly.

Cross-docking is warehouse inventory management sleight of hand. It can save time, reduce costs, and move customer orders more quickly, which is critical when you’re clearing backorders.

The receiving process for cross-docking is similar to regular receiving. Each SKU is checked against the bill of lading to confirm the accuracy of the shipment, identify damage in transit, and uncover discrepancies. But orders are prepared on the receiving dock instead of moving the stock to barcoded warehouse locations for picking and packing. The warehouse management system can generate labels for all the backordered items in the shipment. Workers label the orders and move them directly to the outbound dock.

Cross-docking can save a day or more in filling backorders. It works best for large products that ship in the manufacturer’s packaging, so not every 3PL has warehouse operations in place to manage the process.  

what is FIFO?

8: Use your warehouse inventory management system to ensure FIFO (or LIFO) picking.

First in, first out (FIFO) inventory management is standard for most products, though some products benefit from last in, first out (LIFO) picking. The settings you choose in your inventory management software can help you manage FIFO inventory movement and understand your true cost of goods sold for every order.

warehouse inventory management

9: Design your warehouse to fit your products.

Warehouse design is crucial to efficient operations. A warehouse that processes oversized products needs wider aisles and equipment built to carry heavier loads. A fulfillment center that processes food products needs food handling processes in place to ensure that orders aren’t filled with expired products and that everything follows FIFO inventory controls. A warehouse that ships hazardous materials needs to monitor stock levels to ensure that it doesn’t store dangerous concentrations of potentially flammable materials

These are just a few examples of the role of warehouse layout in warehouse inventory management. It’s critical to choose a 3PL that understands how to process products like yours and has systems in place to move and ship them properly. A mismatch between your products and the layout and expertise of the warehouse can lead to damaged goods and improperly packed orders.

inventory management

10: Remember that excellent warehouse management depends on software and integration as much as physical processes.

When online enterprises set up a new fulfillment warehouse or onboard a new logistics company, the movement of physical goods gets the most attention. But every 3PL is, at its heart, a technology company, and fulfillment centers are only as well-organized as their warehouse management software. 

A robust warehouse inventory management system combined with seamless integration between your ERP and your fulfillment operations is a recipe for eCommerce success. When your systems run without glitches that tangle or even stop warehouse operations, it frees up your time to spend on other aspects of managing and growing your business.

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Improve your warehouse inventory management by outsourcing to Red Stag Fulfillment

Red Stag fulfillment provides set-it-and-forget-about-it fulfillment services for eCommerce companies of all kinds. While we initially specialized in helping companies that sell heavy, bulky, or high-value products, we’ve expanded our capabilities to support a broad range of companies, products, customer bases, and more. Our commitment to quality means that you can trust us with your logistics

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