The idea of having an inventory or warehouse management system is to be able to keep track of the inventory levels in your business. If you don’t already have one, this can be quite a tedious activity (especially if you have a warehouse or you hold stock of certain inventories).

Most inventory system does a good job already. However, some companies are still struggling. While some would blame the poorly designed softwares (which can be valid in some cases), the problem may not always be the system (just describing).

Instead, some of the challenges faced by companies starts right at the beginning – and that’s even before the Development stage of the system. Because the real issue lies in the planning of the company before selecting a suitable system.

With that, I’ll try to demystify some of the basic ideas here. Hopefully, at the end of this article, you’ll get a better understanding of how one should design and plan a great inventory system.

Working Out the End-to-End Process

The fist thing you need to do is to understand you own business processes. Yes, I’m referring to business owners (who is reading this now) who is looking for an inventory system. While I understand that some of you might not be familiar with systems and softwares, the least you can do it to understand your own operations.

In case you’re not aware, designing a system is easy. However, many companies still find it challenging to run their inventory smoothly. At the same time, if you’re not used an inventory system (before reading this), some of you may not know to start.

So how do you go about it?

I recently met up with a client and they had a similar problem. They were about to embark into a trading business and they wanted a system to capture their inventory. When I met with them, I asked them the same thing:

Do you have a clear idea of your end-to-end inventory process?

They nodded as if it was a yes in reply to my question. However, as I dig further, it turns out that they only had a rough understanding and not the full picture of their operations. So instead of explaining how it works, I started finding out the INs and the OUTs relating to their inventory.

In other words, I started asking questions about the process – as this should be the first thing to do as soon as you have the idea of having an inventory system. My aim that that point was to finding out, as much as possible, how, when and where the inventories would increase and decrease.

In case you need to, you can imagine a box that represents the balance in the system (this could be applied to a specific location or even sections with the warehouse). Each time there is an inflow of inventory into the box, the balance increases, and vice verse. Now that we have the box, your goal is to capture all the INs and OUTs.

In order to get the details, the questions I would ask are similar to this:

INs

·         Where do you get your stock from?

·         How would they arrive?

·         How often would they arrive?

·         Who receives them?

·         Who brings them to your outlet?

·         And when is the Goods Receipt entered into the system?

OUTs

·         Where do you sell your goods?

·         How many POS/Sales outlets are there?

·         How are the goods delivered from the warehouse?

·         Who approves the delivery?

As you can see, the questions I asked are not rocket science but what I’ve done here is to systematically figure out howwhen and where does the stock come from and how, when and where would they leave the system.

Once you have your list, your box could evolve and become something like the above. Of course, this would vary from different businesses. For example, a restaurant would have just one storage but a jewelry business would have multiple secured safe. This would also different if you have a hand-full of SKUs versus 2000+ SKUs.

While the situations might change, you need to, as much as possible, imagine the boundary of your box.

Get it?

Multiple Locations

Now that you understand the concept above, then understanding a system for multiple locations is equally easy. That’s because the idea is similar. However, this time, you need to include the transfer of goods between different storage locations. That’s also an easy solution because there’s a “good transfer” function (or a variation of it) in most inventory systems already and this should do the job.

Capturing the Entries and Stock Count.

Once you have the end-to-end design in mind, the next step is to make sure that there is a mechanism to capture all these information. And this is where your inventory system comes in.

Also, you’ll need to ensure that there is a member of staff who is fully responsible for the entries to be captured. At the same time, ensure that you have a good system design that allows you to capture them easily.

If you required a heavy usage, a heavy duty bar code scanner would do the job. Alternatively, with the arrival of cloud technology, you can even capture them with your mobile phone.

Lastly, stock count. While the system can calculate all the inventory that you have, you still need to do your stock count. This is really to ensure that you have capture all your INs and OUTs. Or at least prevent any unauthorised outgoings like theft or wastage.

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