How to Keep Track of Inventory in a Warehouse

Keeping track of inventory in a warehouse is a major task for all warehouse operators.. Large warehouses process thousands of orders  each and every day which requires precise inventory accuracy.. Many distribution centers are still using paper to place orders and follow them through the supply chain process. However, paper is not always reliable for warehousing. It’s crucial to find the best way to manage a warehouse to keep customers satisfied. 

How to keep track of inventory will vary for each warehouse, as most distribution centers have their own unique way of processing information. However, it is important to note that stacks of paper won’t be manageable with business growth. Warehouse management systems are advised for all companies to administer sectors of the supply chain process including inventory control. This is especially valuable for third-party logistics (3PL) warehouses that are thoroughly involved in the entire distribution process. 

Warehouse and Inventory Management Basics

Understanding different warehouses types can help strengthen your knowledge on how to store inventory. Each warehouse follows a unique procedure for counting and storing inventory, but some of the processes overlap. The best systems are developed from trial and error, standard procedures that are modified from learned mistakes create the ideal method for each warehouse.

What is the Difference Between Public and Third-Party Logistics Warehouses? 

While there is a good deal of correlation between public and third-party logistics warehouses, there are also distinct differences amongst the two. It is essential to note the dissimilarities when looking for a warehouse for your products. The largest differences between the two lie in the services offered.

• Public Warehouses - A public warehouse is a storage facility that charges companies on a month-to-month basis either by square feet or number of pallets. These warehouses provide their own equipment and employees to monitor and move products, but they do not offer many services beyond that. Most business owners use these facilities for additional storage closets when they run out of space themselves.
• 3PL Warehouses - These facilities are overseen by logistics companies who offer multiple services within the supply chain process. Services in a 3PL warehouse include warehousing, inventory management, packaging, shipping, returns, and transportation. Along with these services, most third-party logistics companies will take care of managing your stock and inventory. An efficient logistics company will also provide you with a dashboard that reveals exactly where your products are at all times. 

With the amount of services they offer, supplies are constantly moving in and out of these warehouses. It is crucial for these centers to have advanced inventory management systems to keep track of stock levels.

3PL’s are continuing to expand, in recent years the industry brought in roughly 75 million dollars. Many fortune 100 companies depend on these services for their businesses, including:

• Wal-Mart 
• Apple 
• CVS 
• AT&T 
• Exxon Mobil

What Inventory Goods are Stored in a Warehouse? 

Inventory is any product stored within a warehouse. While most businesses store their own branded inventory in its own company warehouse, third-party logistics warehouses store various products from multiple companies and brands. There are four basic inventory categories for each product shipped to a distribution center.

• Raw Materials - Raw materials are the unprocessed products used as a base to manufacture other items. Prime examples of raw materials are forestry, oil, water, cotton, and coal. These natural materials are used as a base to form other products in many forms.
  
• Work-In-Process - These goods are also known as a work in progress, they are materials that are partially finished. These products sit in a warehouse waiting for further processing or completion. Most of the work-in-process materials are associated with construction.  For example, a computer that is completed but the components such as the charger, handbook, and warranty book are missing. This is considered a work-in-process until each item is packed together in a single box and then it is placed in the finished goods section of a warehouse.
• Finished Goods - Products are transitioned from work in progress inventory to finished goods once they have been completed, inspected, and are ready for consumers. Marking inventory is a cyclical process, they begin as raw materials, shift to work-in-process, and lastly, finished goods. However, any product that doesn’t have a parent, meaning they don’t go through the same process as raw materials, can also be considered a finished good.
• MRO Goods - This is a separate category for maintenance, repair, and operating supplies. These goods are part of the production process but are not marked as a finished product.
  They are needed to create the product, but they don’t show up in the final version. For example, when building a piece of machinery for construction purposes, grease is used to oil the ends for proper function. However, grease is not a part of the final product, the machinery is the final product. 

These various goods are stored in different areas in a warehouse and they must be separated in order to keep track of the inventory. Having a good organization structure of inventory makes it easier to track and count for visibility purposes. 

How to Keep Track of Inventory 

The bottom line of warehouse functions relies on inventory levels. Customer retention and growth depends on how inventory is tracked. Customers and business owners like to know where their products are and where they are going. Maintaining data on inventory control is crucial, it ensures you will never run out of products, it shows trends in popular inventory items, and it helps to monitor costs. 

Inventory should be tracked from the moment it is shipped to a warehouse until the point of sale. There are several ways to monitor inventory, but some of the best are: 

• Create reorder points - Reorder points establish a standard for the least amount of product the warehouse can have in its inventory at any time. Creating this number ahead of time will allow for better communication with the logistics company and your business. 

If this number drops below the standard, the warehouse may not have enough in stock to send to customers. However, numbers constantly shift based on consumer demand making it essential to constantly track your inventory.

During the holiday months, for example, it is better to have extra product in stock in case of high demand. Stock controllers monitor these levels and will request reorders of items the warehouse is low on. 

• Use first-in, first-out technique (FIFO) - This is a general guideline for all warehouses, and it is exceptionally important for perishable items. This means the first stock received will be the first stock out of the warehouse and in the hands of consumers. Most third-party logistics companies will implement this strategy for you. 

It is a good idea to enforce this method for all products including non-perishables. Most companies frequently change their branding or advertising on packaging. If they have certain promotions, redesign products for holidays or simply just change the overall look of a product. Making FIFO a habit ensures the shelves will always be stocked with the most current product. 

• Audit inventory - With newer software systems, it is simple to track and monitor inventory digitally. However, warehouses are strongly advised to keep a physical inventory sheet and update it accordingly. Checking stock in the warehouse system and comparing it to an actual inventory count can identify if there are any issues with the software or any complications with inventory counts. 

Another reason physical sheets are recommended is to avoid the loss of data if the system crashes. Digital data could be completely compromised and all stock numbers would be erased if the computer or software crashed. It would be nearly impossible for a warehouse to unpreparedly count every inventory item and mistakes would be inevitable. 

With the data history erased, warehouse managers would also lose the ability to compare any of the previous data with new data. While software is an advantage, always have a backup prepared. 

• Use a warehouse management system- Warehouse management systems make tracking inventory much simpler. It provides a digital view of all of the stock in the warehouse. This software can send you alerts when you need to reorder products, tell you which products were in first, and provide you with an audited list of all the inventory. 

However, it is not always reliable and this could cause a great deal of harm to the warehouse, consumers, and business owners. Inventory management software can also be very expensive. If used properly, this software tool could be beneficial to a warehouse. The best way to manage inventory is to have both software and physical notes on all products.

• Invest in barcode scanners/ inventory management apps - Using a barcode scanner decreases the amount of time employees have to spend manually tracking data. Barcode scanning is one of the most efficient tools for 3PL warehouses because they deal with an array of products from beginning to end. 

Scanning products in when they are initially received, scanning them throughout the warehouse process, and then again when they are being shipped to consumers allows for easy tracking of materials. All of the information collected through the scanning process is made available on apps for the warehousing staff or business owner. 

This can reveal things like how much raw material is in stock, the price of inventory, if any products are on backorder, and more. Having an application is desirable for 3PL’s because they can easily share this information with customers to eliminate any worries. 

Using inventory management tools increases the functionality of warehouses and could potentially increase profit margins. Companies who develop trust in your different types of warehosue storage systems and are able to monitor these systems for themselves through a digital dashboard will be more likely to continue storing their products in your warehouse

The most popular inventory management tools are stored in warehouse management systems. These software systems make it easier to track inventory in the cloud so it can be dispersed through multiple platforms. Warehouse management systems include some of the supply chain processes as well, which contributes to monitoring the entire distribution center more effectively. 

Want to know about other forms of inventory management? Find out how decoupling inventory could work for your business.

Warehouse Management Systems 

A warehouse management system (WMS) is a method to keep track of all the functions within a warehouse. It is particularly important for third-party logistics warehouses to follow a detailed management system, as they usually offer more intricate services extending far beyond traditional warehousing. 3PL Warehouses must look for software that includes features like: 

• Monitoring inventory levels, or how to keep track of inventory  
• Handling order fulfillment 
• Tracking shipping and receiving 
• Support billing needs 
• Reporting real-time data 
• Integrating data through multiple locations 

Handling Order Fulfillment 

Most third-party logistics companies handle order fulfillment services, a process where these warehouses receive, pack and ship out automated orders on behalf of another company. Subscription boxes are a primary example of this service. Order fulfillment software makes the process much easier for picking and packing orders as it automatically prints labels when the orders are ready for processing.

The software also sorts through all of the inventory noting which products are to be included in the fulfillment order. It creates an interactive platform to help monitor the package in real-time. Using this system decreases the chance of human error and saves time by automating the orders. 

Tracking Shipping and Receiving 

Transportation software is also included in most 3PL’s warehouse management system, this gives business owners the opportunity to track their shipments. The software can even create automatic shipping labels once a shipment has been processed and monitor inbound receipts for the arrival of new products. Reverse logistics oftentimes creates chaos and this software helps monitor this process and makes returns much easier for the customer and the warehouse. 

Supporting Billing Needs 

Billing can be extremely complex for most 3PL warehouses as they deal with consumers and business owners. Not only must customers have an easy to read platform to allow them to make changes directly to the bill if necessary, but these distribution centers must also have the ability to create unique bills for special orders. Most warehouses look for features that include: 

• Ability to track all fees for each customer 
• Manage separate bills
• Automated billing 
• Split charges 
• Initiate recurring costs 
• Generate reports from billing
  

3PL’s need to have the ability to manipulate on a per-customer basis because they are involved in various transactions from multiple customers. 

Reporting Real-Time Data 

Real-time data is mandatory for any logistics company, this is the primary feature third-party logistics companies look for in a software system. This enables customers who use these warehouses the ability to see their products in real-time on any device. 

With this software, shippers are able to log in and determine exactly where its products are located. The online platform also signals whether or not the shipper needs to send out more materials. New warehouse management software has integrated real-time data as a standard because it simplifies processes for both warehouses and business owners. 

Integrating Data Through Multiple Locations

Integrating data is important for third-party logistics warehouses, the data must be transferable across many platforms and locations. Some logistics companies begin tracking a product from the moment it’s sent to the warehouse and data must continue to be logged until it reaches the final destination. 

At any given time, this data must be accessible to the logistics company, the manufacturer, and the intended customers. Having this dashboard available at all times will enhance the customer experience and help generate reports for the warehouse to analyze. Communication is a central part of the logistics process, but customers prefer having something tangible to observe their products. 

Regardless of what kind of warehouse you manage, organization and accurate inventory counts are key to making processes run smoothly. The advancement of technology has shaped the way warehouse management systems function. There are various software systems for each distribution center to use however, systems should be selected on a per warehouse basis depending on the amount of inventory and number of services offered. 

How do you Calculate Inventory in a Warehouse? 

Whether using warehouse management software or not, it is crucial for companies to have a backup count of all inventory. This process is time-consuming but should be done at least twice a year to prevent excess inventory or a shortage of inventory, these outcomes could lead to serious problems. The more frequently inventory is counted, the better results you will get. The best way to calculate inventory is to follow a strict process: 

1. Order tags - Having tags helps create a more efficient system prior to the counting day. Fill in information about the quantity and description for each product. Employees will fill in the blanks after counting the products and then sign their name on the tag. If there are any issues with the count, it can be traced back to the employee who wrote it incorrectly. 
   
   The tags help connect the employee to the inventory that’s counted. If there are any issues with a certain category of items the manager can trace the inventory back to the employee who counted it to confirm the numbers are correct. Tags also provide a paper trail to refer back to, if necessary.
2. Do an overview of inventory - reviewing the inventory allows managers to see if certain products are missing or can’t be counted, this is an opportunity to correct these errors. Warehouse procedures should be halted the day before the counting is completed. It is ideal to seal off inventory after procedures have been ceased to ensure no products are received or shipped. If seals are broken the following day, managers can assume the products have been tampered with which will result in an inaccurate calculation.
3. Ensure data is updated - update all data across each platform. Ensuring this data is updated can prevent any future problems with the new count once it has been displayed. Accurate data is crucial to show formulate graphs and charts with the information. Any inventory that has just been sent out should be noted in this part of the process.
4. Temporarily suspend warehouse activities - Freeze any outgoing orders and isolate newly received items to keep your counts correct. Use all of the employees you can get to count materials currently in the warehouse.
5. Assign counting teams and areas - Splitting your team into groups can make the counting process simpler and precise. One option is to split your team into three’s, having two people count the same inventory twice to make sure they have the same number and having the third person write down the information on the tags.
   
   Another option is to have two teams count the same inventory to see if the same number is reached. Either way, it is essential to assign teams count areas. This way there is clear direction and no confusion for what should or should not be counted.
6. Calculate inventory -  Send your team out to count all inventory in the entire warehouse. Monitor the progress and results as you’re receiving them, and make sure you have a procedure for lost tags.
7. Review tag information - Once all of the tags are back, enter the information into an online database and a physical datasheet to analyze results. Inspect gaps in data and assure you can get updated information quickly. 

While this is a long and intricate process it is extremely important to do this quickly, preferably in a day's work to move the warehouse back to normal operation. If necessary, make changes to your warehouse procedures each time you complete the process. 

Challenges with Inventory Management 

Monitoring inventory is critical for all warehouses, but especially for third-party logistics centers. A shortage of inventory can lead to backorders or worse, the customer not receiving the product at all. Excess inventory can result in lost profits as you may have to throw out expired products or products with old labels. There are several challenges connected to inventory management, including: 

• Being aware of your inventory - Third-party logistics companies see inventory from all ends of the spectrum, not getting lost in the inventory can be a challenge. However, it is extremely important for every warehouse to be aware of what is being shipped and what has been received. Keeping digital and physical forms of the inventory available at all times can be a huge advantage. Knowing inventory levels helps companies realize when stock is running low or when it is too high. For 3PL’s, this is key for letting business owners know when their products need replenishing.
• Tracking processes - establishing a process can be beneficial to monitoring inventory, but every warehouse should constantly monitor these procedures. Occasionally, people get lost in redundant methods and mistakes will begin. Tracking mistakes within the processes allows warehousing managers to make adjustments to procedures to avoid future mistakes.
  
• Following trends in demand - monitoring trends in demand is important for utilizing all the space in the warehouse. If a certain product was once popular but now isn’t selling as much it should probably be rotated to the back of the warehouse while the items that are selling quickly are moved to the front. Following these trends will also tell you if you need to order more of a certain product.
• Visibility - This goes back to warehouse management software, as well as digital copies of inventory. Having a dashboard available to view not only inventory, but stocks, revenue, and costs in one place can help warehouse management tremendously. A manager needs to have the ability to pull an updated list of this inventory at all times. However, it is complicated to keep this list updated as counting inventory is meticulous.
• Utilizing space - Utilizing space is extremely important to keep warehouses functioning properly and to monitor inventory control. If there is wasted space in the warehouse that is a loss of profit. Enforcing a strategic floor plan can save the company time and money. 

How to Improve Inventory Accuracy 

Overcoming inventory challenges is difficult because there is not a single solution for every problem. Resolving issues is different for each warehouse, especially for public versus third-party logistics warehouses. Some common suggestions to solving inventory management issues are: 

• Organization
• Monitor the supply chain
• Choosing an efficient program
• Back up inventory
• Multiple warehouses

Organization is important for each part of the supply chain process but it’s particularly important when tracking inventory. Creating a floor plan to sector off where certain goods should be placed is the first step to organizing a warehouse. 

Once everything is placed in the right area of the warehouse ensure that each item, rack, and shelf is labeled. Provide racks and shelves to optimize storage and space utilization. After all of these procedures are verified, schedule routine check-ins to guarantee your warehouse stays organized. 

In regards to organization, monitoring the entire supply chain is important to improving inventory accuracy as well. If your warehouse is organized you should have diverted areas for incoming and outgoing shipments. However, these products should be tracked from the moment they leave the shipper’s hand until the final destination. This helps not only keep track of your inventory but also satisfies the customer. 

To make tracking easier, all warehouses should invest in an efficient software program. There are a wide array of warehouse management systems available, but testing a few and deciding which is best for your warehouse will optimize your performance. Using software ensures optimal data is pulled from the warehouse, making graphs and charts available at the touch of a finger. 

Uploading data into a software system makes it easier to evaluate numbers, however, it is extremely important to back up all data that is entered. Saving files of your data on multiple platforms can help back up your data, but also printing the information or simply writing it on a piece of paper ensures your data will always be available to you. 

Lastly, having multiple warehouses available for storage can help your company with warehouse inventory. Locations around the state can help get products to your consumer much quicker and it can help with storing items specific to a certain region. Having warehouses in other countries help reach an even larger consumer population and organize more of your products. 

Again, these processes are different for every warehouse, but these are some of the most popular suggestions to keep warehouses running smoothly. Keeping track of inventory can be difficult, finding what works best for your warehouse is the best solution to any of your problems. 

Warehousing with R+L Global Logistics 

Tracking inventory in a warehouse is mandatory for the success of a logistics company. Not knowing what you have in stock or having an incorrect count of inventory can harm your business and the relationship with your customers. Tracking inventory is the soul of a warehouse, without it, the business will ultimately fail. 

Warehouses begin to fill up quickly, and before you know it your products are overflowing and the warehouse becomes unmanageable. Working with a third-party logistics company can help your business perform better. 

R+L Global Logistics will take care of the difficult processes for you. We can handle every step in the supply chain and provide you with a tracking number to follow us through the process. This will essentially provide your company with another warehouse but without all of the extra work and costs. 

We incorporate advanced technology into our warehousing strategies to ensure your warehouse is operating efficiently. We have locations nationwide if you’re looking for a region-specific warehouse. Some of our best-known features are: 

• 24/7 Security, including remote access, monitored cameras
• Flexible Hours and Staffing
• TSA governed and regulated distribution centers
• Modern safety and fire protection systems
• Dedicated full-time staff members
• Strategically located near major airports and ocean ports
• Connectivity to WMS and freight operating systems for end-to-end visibility

We also offer order fulfillment, E-commerce fulfillment, packing and repacking services, and reverse logistics. You will receive a real-time dashboard to follow your products in each step. 

How to keep track of inventory is a question best answered by an R+L Global Logistics consultant who will organize the entire process for you. Contact one of our customer service specialists at 866-989-3082 and they will make your needs a priority. They will help you get a quote for fulfillment and distribution. We will take the stress of managing a warehouse from your hands to allow more time for you to focus on business productivity.