Tom Ashley, Chief Operating Officer
Continuing our series in which ILG Head of Projects and Development, Lee Simmons and I address the key questions customers ask about outsourcing their fulfilment operations, I’m going to turn my attention to the crucial matter of stock management.
There are two aspects to warehouse stock management: the physical and the systemic. When items arrive into the warehouse they are assigned a location both physically and within the warehouse management system (WMS). The number one goal, to prevent over selling, missed sales opportunities and disappointed customers, is always to ensure that the physical stock on the shelf matches the record in the WMS, which in turn matches your system. There are a number of things that warehouse managers do to try and ensure this match 100 per cent of the time.
Cycle counting involves counting a set number of items on a weekly or monthly basis. For example, if you have 120 different stock keeping units (SKUs) and want to count your stock in full twice per year, then you would agree a frequency of 20 per month, five per week, one a day. You can liaise with your fulfilment partner to agree the best times to do this. You don’t want to schedule a stock take right in the middle of your big season delivery but it might make sense to do it during your quieter months and before your big sale, to make sure your stock matches.
Stock control strategy
Every warehouse will have its own strategy, which will involve auditing goods receipt paperwork, counting units below a threshold, counting high value items etc. Whatever strategy your warehouse partner prefers, you may choose be involved in the process.
Taking stock is a high-maintenance process, which should be agreed at the start of any new contract. It involve ‘freezing’ the stock, effectively meaning that all orders are removed from the system so that a complete reconciliation can take place. Make sure you outline in advance who is paying for what and what the impact will be on your business. Will the stock take be completed over a weekend or during normal work hours, and will there be a delay to orders?
Many of our clients require an audited stock take, which is something most fulfilment companies should be au fait with and will work directly with the auditors to support you on.
What goes where?
The layout of warehouse stock follows very different principles to that of retail stock. In a retail environment, it makes sense to position all the same styles and sizes in the same location to make life easier for the customer. In a warehouse, the starker the difference between products, the quicker the items can be identified and picked. Rather than having to hunt through the whole style to find the correct size, you’ll find just one colour or one size in the location. This might come as a bit of a shock when you first go and see your stock.
Sorting your stock system
These are the decisions that govern the physical control of warehouse stock. When it comes to systemic stock management, the first decision you need to make is whether or not you want to split your stock by channel. Throughout my time working at ILG I have seen this done in lots of different ways and there really is no right or wrong answer. It’s just a case of what works for you and your business.
The simplest stock model is one account linked to one pot of stock. However, in our experience there is often a need to split e-commerce from wholesale, or new stock from archive or old. A good way around this is to set up separate accounts, which may just split the stock but may also go as far as invoicing separately.
What’s hot and what’s not?
Finally, it is important that you share information on fast and slow moving lines with your fulfilment partner. This will enable them to store fast moving lines closest to the packing station, while slower moving items can be boxed up and consolidated. Fulfilment houses thrive on throughput rather than large amounts of storage, so anything you can do to keep stocks to an efficient minimum will be in everyone’s interest.