To maintain an accurate inventory count over a period of time your inventory must be locatable when you need it. This will require some sort of system to find that specific item within your warehouse. Secondly, you must be able to track that item from the time it was ordered, received, put away, picked, and shipped out or utilized in production or point of use. Finally, your inventory management must also keep a timely record of these events.
Let’s discuss the three common inventory systems that are currently used in many different industries. Each inventory system has pros and cons depending on the industry, size and type of organization that you run. Some of the things to take into consideration when devising your inventory system is the use of space, equipment and labor, as well as how flexible the system must be and how easy it is to use. A small company with limited space and few SKUs to manage may not require a large detailed inventory management system.
The four most common locator systems are the memory, fixed, zoning, and random locator systems. The memory system is the most basic of the three mentioned above. It is essentially a locator system used by one person or a small group of warehouse staff that know where inventory belongs within the warehouse. Organizations that store limited SKUs in small warehouses can get away with this very basic method of location. Some of the benefits are clear, like complete freedom to use all available space with in the warehouse. There is also very little paperwork and data entry required to operate this system. The memory system does have its drawback though. It is only as accurate as the memory of the warehouse staff. If that manager forgets something, then the system breaks down and the information is lost. This could result in inaccurate counts which could lead to a variety of problems down the supply chain.
The next method of locating stock within your warehouse is the fixed locator method. This particular system establishes a fixed location or home for each individual SKU within the warehouse. In order to accomplish this, large amounts of space are required as there needs to be enough room at each location for the maximum number of units that would be present at a given time. The result of this system is more unused space. This is known in the industry as honeycombing. Essentially it is a situation where the space that is available is not being used to its fullest potential. There are a number of causes that contribute to honeycombing: the shape of a product, how the product is put away (if it is stackable), and simple poor housekeeping and warehouse layout that leads to unused space. Although honeycombing is unavoidable, the goal of the warehouse staff is to establish a system that minimizes its effects on the organization and maximizes the utilization of space at hand. There is actually a formula to help you determine the amount of honeycombing that is taking place within your warehouse. If you take the total number or empty locations and divide it by the total number locations, you will come up with a ratio. This is the percentage of your warehouse that is currently underused. There is a more precise method of determining the impacts of honeycombing which will calculate the actual square footage. In this method you will have to determine the actual size of each position and run it through the above formula. This ratio will be closer to the actual percentage of underused space as locations may vary in size and shape.
The fixed locator system has many pros. It is designed to be easy to understand where things belong because the locations do not change. This reduces the learning curve for new personnel and simplifies receiving, put away, picking, and restocking as business rules can dictate what the staff is to do in a given situation. This system allows for items to be stored in sequential order and gives greater control to lots and facilitates FIFO control. Also, being that each SKU has a home within the warehouse, products can be placed in locations that are most suitable to their weight, size, hazardous nature, and other characteristics. Fixed systems tend to lead to a greater amount of unused space with in your facility. It is very important to plan the layout of your facility as you need to provide a location for every SKU that will be in the warehouse at a given point in time. In addition to planning, it is difficult to add locations if you are sequentially storing your merchandise. If you add a sub group or a sub category within a product line and it is currently in numerical order, then you would have to move every item that follows the addition.
Next we have the zoning locator system. This is a system that groups all like items together in a particular area. If you are a food wholesaler you would need to keep all of the frozen goods in the freezer, the produce in the cooler, and all of your canned and dry goods in dry storage. This method of segregation provides the flexibility to move or add items to a particular zone or adding new zones entirely. This system, like the fixed system, contributes to honeycombing and underused space within your warehouse.
Finally, we come to the random locator system. This is when there is a specific SKU tied to a unique location within in the warehouse where the SKU is on site. Once that item is picked, that space will become available for another SKU. This method provides the flexibility of the memory system with the control of the fixed or zoning system. In order to accomplish this type of locator system you must have the intelligence of a sophisticated computer system at work for you. Random locator systems provide the greatest use for space as an item can be placed wherever there is room. The obvious advantage of maximization of space coupled with the control of item whereabouts is what makes this method attractive to many organizations. The main downside of this system is that it requires constant updating of information to obtain the accuracy required to run this type of system. A software solution to provide bar codes coupled with scanners is almost a requirement to implement a random locator system.
Inventory software for your warehouse must be able to accomplish the type of locating that you require. Zenventory web based inventory management software has the ability to create bar codes, location labels, and business rules to assist your warehouse personnel maximize the space that you currently have. Contact us or request a personalized demo to learn more on how our solutions can fit with in your organization’s needs.