One of the most significant barriers ecommerce entrepreneurs face when deciding whether to move to a multichannel business model is multi-warehouse inventory management. The logistics of fulfilling from more than one warehouse when selling from more than one channel can feel overwhelming, with many sellers holding back due to fear of these logistics and the extra costs that may result.
But, knowing multi-warehouse inventory management best practices, you can face your fears head-on and work around the anxiety to increase sales with multichannel selling without messing up your seamless fulfillment strategies.
This post gives you the seven multi-warehouse inventory management best practices you need to streamline your ecommerce business as you grow into a megastore. So grab your coffee, and let's dig in.
1. Use Both Fixed and Movable Tracking
Investing in your inventory management can save much hassle in the long run. Both fixed and movable tracking are needed to create a professional inventory management system. Why? Because by combining fixed and movable tracking options, you ensure that you always know whether the equipment required to process the order is up to scratch, where each product is placed, what your products' status is, and which products are ready for fulfillment and shipping while assigning warehouse destinations precisely.
Simply put, it makes your fulfillment process easier and quicker. If you are new to warehouse management terminology, here is a short explanation of both:
Also known as asset tracking, fixed tracking refers to the constant monitoring of your equipment used in manufacturing your products or those that help you fulfill your warehouse and fulfillment tasks. RFID tags or barcodes can be used to track equipment location and condition.
Also known as inventory management, movable tracking is where you track each product, how many of each product you have, which products need to be restocked, and what products are in excess. In short: it's the real-time management of what stock you have and what numbers you have.
2. Keep a Close Eye on Your Bestsellers
The next best practice is vital: you need to monitor your best-selling products from each channel and all channels combined. By continually assessing products that are selling faster and how many you're selling in a month, you can set up restocking systems to ensure you are never out of stock. This information will also help you evaluate which warehouse your products should be stored in, thus ensuring your overall multi-warehouse inventory management system is efficient, which will, in turn, offer seamless fulfillment of your orders. This brings us to the next point.
3. Not Every Product Needs to be Stored in Every Warehouse
As your ecommerce business grows, so will the number of products you sell. Keeping all your products in all your warehouses doesn't make sense. One of the best ways is to separate your stock into bestsellers and low sellers, as we pointed out above, and then stock your warehouse accordingly. You could, for example, ensure that your bestsellers are at all your warehouse locations to allow for quicker, more cost-effective fulfillment while keeping all your slow sellers in one warehouse and your medium sellers in another.
Pro Tip: Don't forget that customers are likely to order more than one product at a time that could be stocked at various locations. This can result in extra shipping and packaging costs, as packages may need to be fulfilled from different locations. It would help if you weighed these costs against the warehouse organization you pick and, where possible, match products commonly paired together in your warehouses.
If you're not using multi-warehouse management software when organizing warehouses, mark your products as out of stock once they have been moved to the new location.
4. Update Data in Real-Time
The most critical multi-warehouse inventory management tip is ensuring that all your data from your warehouses and ordering systems are in sync to prevent delays. If you run a small business with one warehouse from your home, you can get away with this manually. But if you are a growing business adding more than one warehouse location, the only way to manage data in real-time is with a proper multi-inventory management system such as our new Multi-Warehouse Management feature, which allows you to:
- Create multiple warehouses
- Manage quantity and transfer inventory between warehouses
- Channel-based warehouse inventory allocation management
- Implement 3PL and Amazon FBA integrations
- Manage dropship orders
- Implement automatic order routing by the supplier
- Create invoices, packing slips, and shipping labels
- Get order notifications
- Integrate with carriers and shipping software
- Access real-time order status with all marketplaces
5. Use Wave Picking and Cross Docking to Save
When planning your multi-warehouse inventory management, you want to ensure that you are aiming for a lean operation. In other words, you want to keep costs down. Wave picking and cross-docking are two warehouse management systems to help you achieve this.
The latter is a system whereby as soon as a product arrives, it is shipped out. Or, if you manufacture your products, think of it as a made-to-order system that allows for much less storage space, thus keeping warehouse costs down. However, as your business grows, it is hard to maintain this storage option without causing fulfillment problems.
Wave picking is better for a more significant, growing business and involves more storage space where orders can be sequentially filled throughout the day.
If you have good inventory management software, you can use both methods in your complex shipping system to ensure a unique, lean system.
6. Keep Stock Levels Balanced
Your data should determine stock levels to maximize storage space and ensure no fulfillment delays. To ascertain your maximum, minimum, average, and order levels, you need to look at your product sales, inventory turnover, and lead time rates to adequately manage your inventory across all warehouses. Keeping tight control over your stock levels – ensuring they are balanced – is essential to keep costs down. Why? Because it eliminates waste and ensures you are not overextending yourself with considerable stock costs.
Pro Tip: Some additional KPIs you should be keeping an eye on to choose which warehouse to stock which product and optimize product levels include:
- Your processing cost per order
- You lead time stats (or order fulfillment latency)
- Your perfect order rate
7. Count Product Stock in Each Warehouse Separately
Lastly, ensuring that you do stock counts at each warehouse is super important. Common mistake ecommerce sellers make when changing to a multi-warehouse business is assuming they need to only track the total number of products without considering the product levels at each warehouse. You need to be aware of all your products at each warehouse to ensure those stock levels we mentioned are balanced at each warehouse.
Running out of a product at one warehouse can cost time and money, and if you're not using multi-warehouse management software, you need to work hard at keeping an eye on product numbers at each warehouse.
Pro Tip: To keep a handle on regular inventory counts when you have many products, split counts into focus lists so that you don't have to count all your products all the time. The best way to do this is by dividing your products into high-risk (the products with the worst inventory count track record) and high-value (products with the highest revenue potential.)
There you have it: multi-warehouse inventory management best practices. If you have further questions, feel free to get in touch with our warehouse management experts.