As a business owner, knowing how warehouse and inventory management impacts your bottom line is important. You should see each department’s status and what changes you can make to run your business more effectively. Most advantages and problems are on the warehouse floor.
Here’s what business owners can expect from a warehouse analysis.
What is A Warehouse Analysis?
A warehouse analysis or audit is an inspection your leadership or an outside professional performs to inspect your product performance, workplace safety and production efficiency.
Your inventory can make or break your company. At first glance, what seems like an efficiently-made and well-received product ready for shipment could be stacks of returns or dysfunctional items. Conducting a warehouse analysis lets you know exactly all you have and what you have to gain. By the end of the investigation, you should have exact numbers for every item on the floor.
Your product may be an easy way to compile data, but looking at your team is crucial to any analysis. A warehouse analysis does not just involve seeing how quickly they can produce and send out products but what safety measures are in place to protect their livelihoods while they do it. Is everyone wearing the correct personal protective equipment (PPE)?
Your analysis can also identify whether there are too few or too many people on one floor section. A warehouse analysis can answer these and more.
By valuing the people, machines and products within your warehouse, you can ensure your operation is as smooth as possible.
Inventory Analysis
Inventory analysis is more than supply and demand. Your inventory involves suppliers, manufacturers, packagers, distributors, vendors, delivery drivers, warehouse workers, etc. All parties influence your overall efficiency and item quality.
The best way to know the status of each component, managers and staff need to know what to prioritize, which inventory goes where and when to experience it. When producing a product, items go through different classification stages, including the following 10. Evaluating each can help you make any necessary changes.
1. Raw Materials
Raw materials are unrecognizable when made into finished goods. Components are similar to raw materials but remain recognizable from their original form when they become finished goods.
2. Work-In-Progress (WIP)
WIP includes raw materials or components, labor and packing materials used in production. It is also known as an “in-process” inventory.
3. Maintenance, Repair and Operations (MRO) Goods
These are resources supporting production and manufacturing to ensure consistency. MROs include computers, janitorial supplies and safety equipment.
4. Packaging and Packing
Resources that separate and protect products by providing labels and stock-keeping unit (SKU) information. They also include materials that package bulk SKUs.
5. Finished Goods
Items that made it through manufacturing are ready for distribution and sale. They have gone through quality control and are moments away from leaving the warehouse.
6. Decoupling Inventory
Inventory that workers remove from the production line to improve supply line efficiency. These typically are broken or in-progress products.
7. Cycle Stock
These are raw materials, components and other products used to fulfill minimum production quotas or satisfy sales orders.
8. Transit Inventory
As the name suggests, these are items between different sourcing, manufacturing and sales locations. You might refer to them as pipeline inventory.
9. Theoretical inventory
This is the inventory reported by bookkeepers. They commonly use it to compare with actuals. Theoretical inventory is the perfect amount of product to satisfy demand without safety stock.
10. Excess or Obsolete Stock
These are unused stock, whether no one purchased it, no one can use it or it is a leftover manufacturing material.
Every approach to analyzing inventory is unique. Your product has its business model. It is important to acknowledge the complexities your team faces through your analyses.
Inventory analysis safeguards your data against outliers and examines current supply and demand while anticipating future trends.
What You Can Learn
You can learn many things from an inventory assessment and use the results to improve your efficiency.
- Supplier Reliability – What is the average product delivered intact and on time? How often can you restock your product?
- Transportation – Are your deliveries on time?
- Warehouse – Is your layout conducive to a smooth workflow? Is there any wasted space? What is the average amount of product going out? How long do things remain in storage? What is your inventory cost rate?
- Customer Satisfaction – How many items did customers return? Were the items intact or damaged? How many things are going back to your vendor?
A warehouse inventory analysis can influence whether you choose to keep or change a vendor or transport method, which products to add or remove from your business and how to change the floor to improve efficiency.
Safety Analysis
Aside from inventory, safety is necessary for any warehouse analysis to protect workers, decrease liability and improve productivity.
The United States Bureau of Labor and Statistics reports that four in 100 warehouse and transportation employees get injured on the job. A safety analysis is necessary to prevent these occurrences. There are four main categories to evaluate.
1. Physical Hazards
Look at each task performed in your warehouse and identify any potential physical hazards. Does heavy equipment have a safe operation path and regular maintenance schedule? Is there anything sharp that sticks out and could injure someone as they pass? Anything on the floor that could easily cause harm is a physical hazard.
2. Incident Risks
These are the risks associated with every task performed in the warehouse. Identify familiar “what if” scenarios, including past incidents. Liquid, sparks, unaligned robotics and other items may not be an issue when properly controlled but otherwise could cause injury.
3. Workers at Risk
The safety risks on the warehouse floor partly depend on the vulnerabilities of the workers involved.
Do machine heights accommodate the workers using them? Does anyone need accommodations? Does PPE fit properly? All are considerations in a safety analysis.
4. Observation
During your safety analysis, it is essential to observe floor operations to ensure safety protocols get followed. Are there any training updates that need to happen? Are too few people doing a task? You will want to do this operation during an average work day so you can get the most accurate representation of potential risks.
Safety needs differ for each company, and observation is an excellent way to identify issues unique to your warehouse.
What You Can Learn
Your safety assessment can tell you a lot about how your warehouse operates on a daily basis, including the following.
- Sensors – Are safety sensors functional? Do your workers understand the meaning of each?
- PPE – Does each employee have a well-fitting set that accommodates their tasks. Is it stored and cleaned properly to maintain quality.
- At-Risk Workers – You can determine who needs more protection and how to make each section safer.
Your employees are the reason your company stays in operation. They deserve your care.
Performing A Warehouse Analysis
All business owners should invest in a warehouse analysis, whether internal or outsourced. They provide reports you can use to improve your production efficiency and keep your warehouse a safe working environment.
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