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Ecommerce Inventory Management to Automate Ecommerce | Addverb

Much like the advent of the web revolution in the 1990s, in the twenty-first century E-Commerce has fundamentally altered the way goods are sold and delivered to customers across the globe. This change in paradigm from offline to online has forced supply chains to become more flexible and agile and has created highly complex problems being faced in warehouses and distributions centers. Eventually, all e-commerce companies have realised the final frontier will be conquered in the warehouses. E-commerce Inventory Management Automation strategy will prove to be a major game-changer in the way warehouses operate, as it helps in smooth operations, provides future scalability and accommodates flexibility. Companies that understand automation, shift early and navigate it with aplomb, will be the ones left standing when the dust settles. Advances in automation, robotics, artificial intelligence and machine learning will transform the way fulfilment is carried on. Ecommerce is a goliath industry and hence its automation strategy is not only knowing when to automate but also where to automate and how much to automate. While answering these questions, it is important to look at the workflow to identify processes that are labour intensive and pick the sweet spots that will deliver the best value for investment. Automation – for automation’s sake is not the right approach. Let us look at some functions within an e-commerce business that can leapfrog efficiency with automation.

1. Inventory Management

Inventory management is closely tied to a company’s financials. In any e-commerce warehouse, correct control over inventory is crucial because of the large number of SKUs being handled. Accurate inventory will give you a birds-eye view of the amount of revenue potential from every single storage location. Also, with effective automated inventory tracking, you can ensure that at no point in time you are understocked or overstocked, thus reducing operational costs and ensuring higher efficiency.

2. Seasonal Demand & Sortation

E-commerce companies are prone to demand fluctuations based on seasonality as they cater to a wide range of products. E-commerce Automation solutions help them predict the demand patterns and also allows the warehousing operations to scale up and scale down almost immediately which is not possible in a manual system. Also, with mobile robots and sorting robots, the process of sorting the deliveries becomes much easier and cost-efficient.

3. Returns Handling

An important element that is a given in any ecommerce business is handling the returns. This calls for highly automated tracking, restocking, storing and retrieval activities all rolled into one. Efficient software solutions must be deployed for data integration across all sub-tasks that should ultimately result in enhanced customer experience and satisfaction.

4. Picking

One of the biggest benefits while using an e-commerce platform is that you can order 1 item or 100 items from a wide range of available products. This flexibility increases customer retention on one hand but makes the process of collecting these items in a warehouse, which is called Order Picking, highly complex. Automation offers tremendous productivity gains in order picking operations by eliminating the non-value added activities like walking and searching for items and increases the accuracy of picking operations through advanced software. Goods-To-Person Automated systems can provide a throughput of 1200 picks per hour, which is a 1000% increase over manual systems.

5. Scaling

One of the problems that ecommerce players often face is that the warehouse capacity becomes full by the time it becomes operational, such is the increase in demand that we are witnessing. Automation allows you to use the height of the warehouse with solutions like Pallet ASRS, Mini-Load systems and carton shuttle systems. This changes the paradigm by giving more space to expand in the same warehouse and any player can easily scale up in an existing warehouse by utilising the height rather than looking for new warehouses for different scale of operations.

Customers’ behaviour in response to technologies and faster embrace of new ways of engaging with ecommerce companies will profoundly influence companies to not just be price centric but also be velocity centric (How fast can you deliver). A winning strategy with the right mix of automation, which helps in reducing the operational cost and increasing product velocity should be able to firmly help e-commerce companies to deliver immense customer satisfaction and business value.

ABC Analysis & Its Role in Inventory Optimization

To understand the different inventory control measures and their value addition to the businesses, its first essential to understand the scope of the word ‘Inventory’. Theoretically, inventory would be the finished goods that the company holds for sale to its customers in the future. Inventory Control, on the other hand, is the systematic control and regulation of the purchase, storage, and usage of materials to maintain an even flow of production and to avoid excessive investment in materials.  The literal meaning would be easy to grasp as compared to the small nuisances it sums up to be a part of. Hence inventory control has been given that much of prime importance as its manufacturing.

What is ABC analysis in inventory management?

How often have we come across articles/blogs/literature which elaborate the plight of an operations manager struggling to have a good model in place as far as inventory control procedure is concerned? How often have we seen businesses treading on a downward slope because the inventory control processes were not good enough to land them ahead of the curve as far as operating profits are concerned. It is no surprise that the decision-making authority as far as inventory control is concerned is of critical importance for a business to gain a competitive advantage.

ABC analysis of inventory (aka Pareto’s law) is one of the most important and widely used inventory control technique. The process involves breaking down the stock items into three major classes according to their cost usage, so the company can focus on items with preeminent cost value since they account for a compelling percentage of the abc inventory costs.

ABC Analysis in inventory management works by dividing items into 3 categories

Class A– items are goods with annual consumption value the highest i.e the top 80% of the annual consumption value of the company but account for only 20% of the total inventory items.

Class B-items are the interclass items with a medium consumption value; that 15 % of annual consumption value typically accounting for 30% of the total inventory items.

Class C-items are, on the contrary, items with the lowest consumption value; the lower 5% of the annual consumption value typically accounting for 50% of the total inventory items.

Classifying the abc inventory items aims to assist the inventory managers to focus more on class A items, as they keep the top-notch priority and calls for tight control. While class B has comparatively low priority, spans items with availability either low or out of stock, and veritably, they account for 20% of the total inventory cost. Class C items have the least priority, and it uses the simplest inventory control methods.

So, ABC inventory control requires segregating inventory items based on their relative importance, for instance, resource availability, fiscal value, lead time, manufacturing requirements, etc. Practitioners claim that ABC analysis can handle cyclic inventory effectively, for ‘A’ class inventory items, counted weekly for accurate monitoring of items, consecutively, has a greater impact on the inventory cost. Conversely, ‘B’ class items, having less impact on the inventory, perhaps counted monthly and ‘C’ class items counted once in three or six months as their consumption score is low with less impact on the inventory value.

How does the ABC technique help in warehouse management?

In a typical multi-warehouse, the nitty-gritty of controlling inventory increase the inventory cost if not controlled properly. ABC analysis cyclic counting has been an effective inventory counting technique across multi-warehouse where inventory managers assign the inventory into one of the three ABC analysis class.

Inventory Management –

ABC analysis of inventory management can be a smart strategy in the ASRS (Automated storage and retrieval system) for increasing the overall efficiency in the warehouse. For disorganized storage, the categorization strategy in ABC ensures the fastest access to the items in the highest demand, for instance, storing the items with high priority in the front section of the ASRS.

Resource Management-

The analysis approach can be a part of a computerized resource management software like WMS (Warehouse Management System), subjected to access real-time data of the inventory items. Additionally, the analysis establishes a smart order routing, a quick initiation into a smooth transfer of goods across the multi-warehouse.

Picking Technologies –

To select the right picking technology, this technique helps to identify and select among different picking technologies like Voice Picking technique ( Pick by Voice, Light – Directed Picking Technique ( Pick to Light ), Artificial Intelligence and vison based  Technique ( Pick by Vision ). To improve the travel time within the manually operated warehouse, where operators are picking by forklift or by hand, or in the automated warehouse that running automatically on conveyors, with cranes and robots handling different processes.

Supply Chain Management-

ABC analysis helps the various stakeholders of the supply chain in the following ways –

By this categorization, one can identify hot spots and separate them from the rest of the items, especially those that are numerous but not that profitable. Identification of inventory items that pose the biggest business risks due to theft or damage and pose the largest opportunities from sales is also possible from this analysis.

It helps warehouse managers and other supply chain professionals to prioritize their time.

It empowers warehouse managers to achieve close to 100% inventory accuracy.

Also, importance of ABC analysis can also be seen via help in making Smarter Purchasing and Inventory Control Decisions as well. Warehouse owners and supply chain managers have limited time and resources, so they must allocate their energy in the most efficient way possible. ABC analysis helps them identify the areas of their business that require the most attention in purchasing and inventory control.

Role of WMS in boosting supply chain efficiency

The primary function of a warehouse management system (WMS) is to monitor the transfer and storage of goods within a warehouse and to process the associated transactions, including shipping, receiving, picking and put-away. WMS is a database-driven computer program that helps boost warehouse productivity by controlling cutaways and keeping inventory accuracy by documenting warehouse transactions. WMS also helps stock guide and optimize based on real-time details on bin utilization status.

How WMS can enhance supply chain management

A supply chain involves the flow of goods and services, right from the raw materials to production work-in-progress, and until the delivery to the customer. In this chain, warehouse is an integral part that ensures operations to happen effectively from suppliers to the immediate customers. A free-flowing logistics supply chain is nearly impossible without a powerful warehouse management system, as it removes all the irregularities, delayed sourcing, inventory management, and many other factors hindering the chain.

  1. Provide a Centralized platform

A WMS software offers a streamlined platform to track, monitor, and manage all the functions across the supply chain and logistics. Departments such as storage, shipping, and distribution are all connected under one software, thus helping overcome the information gap and friction among vendors. This guarantees a continuous flow of goods, helping the businesses to grow exponentially.

  1. Inbound & Outbound Process Optimization

A resourceful WMS is equipped with tools that can help plan and develop process automation, establish high-performance indicators, and align the ongoing processes to gather real-time information. WMS software can help determine the effective use of labour and space to minimize the wastage of resources in the supply chain. This software helps in location management by identifying the best location to keep certain goods or products in a warehouse, thus bringing optimal workflow in a warehouse.

  1. Cut-down expenses of operation

A well-designed WMS software allows suppliers to plan more frequent cycle counts (either of single or multiple goods), which gives them consistency in business and accelerate shipments in order to meet customer demands. WMS also helps the warehouse to run more smoothly with limited human monitoring and giving directions in the supply chain operations. Overall, this not only increases the volume of delivery but also reduces time and cost.

  1. Accurate Inventory visibility

In a warehouse, keeping track of the exact level of inventory is very crucial. WMS steps in to collect all the relevant data through serial number tagging, barcoding, and RFID tagging of the available stock. Once the data is collected, it is transmitted to the central database for further processing that happens in real-time. The database then helps provide useful reports as per the requirement about the status of goods in the warehouse. This increased identification of goods improves forecasting and smart analytics helps businesses to predict the customer demand for a product, especially during specific times of the year – such as holidays. This helps a warehouse to stock enough goods and ensure meeting customer satisfaction.

  1. Transparent Reporting Tool

One of the major benefits of WMS in supply chain and logistics is its ability to detect issues sooner and respond to them immediately. When one of the suppliers is unable to fulfil orders on time, WMS informs all the related users in the chain, immediately after the information gets updated in the system. This helps business receive enough time to find an alternate vendor, without affecting the customer experience.

Thus overall, a well-equipped warehouse management system has a very positive boost on the supply chain logistics of a business. It improves the consistency of product quality, increases customer satisfaction and leads to a brand name of trusted player in the market. However, a business must keep in mind that WMS is not a quick-fix solution, rather, a long-term tool that will help manage the warehouse inventory based on collected data. A business that is ready to invest in WMS must be certain of its streamlining goals and the upcoming business benefits. Such systems not only require capital investment, but also running costs, and equal enthusiasm and involvement from the warehouse team for its smooth operation.