A 3PL Operations Manager’s Guide to Effective Inventory Management
Everything you’ll need to know to stay on top of your warehouse inventory.
Introduction
The US Census Bureau noted that in October 2022, manufacturers, retailers, and merchant wholesalers carried almost $2,500 billion in inventory, 16.4% more than the previous year. As more businesses turn to third-party logistics (3PLs) to help them manage their inventory and fulfill orders, the global 3PL market is expected to grow to USD1,993.72 billion by 2028, with a CAGR value of 8.7%.
While this is great news for the industry, more demand is being put on 3PLs to deliver quality service to stay competitive as well as maintain and attract customers. It’s vital to stay on top of your inventory and ensure that everything is accurate, fully accounted for, and visible to customers.
Here’s how you can do so.
SECTION 1
What Is Inventory Management?
In essence, inventory management oversees the storage of goods within the warehouse, monitoring inventory levels and forecasting demand.
Optimizing your inventory minimizes costs, increases sales and profits, efficiently uses capital, and helps maintain customer satisfaction.
Good inventory control and management will help you optimize your storage space to ensure that your warehouse maintains optimal levels of inventory required to complete customer orders on time. Simply put, it helps you cut costs, save time, and drive profit.
With so much at stake, many 3PLs turn to warehouse management software (WMS) to help them manage their inventory holistically, from when a product arrives at the receiving dock to when it is shipped to the customer.
SECTION 2
The Case for Warehouse Management Software
Some warehouses choose to track their inventory manually. In 2018, a Warehouse Education and Research Council survey noted that many warehouses relied on manual systems such as Excel spreadsheets or disparate modules to run individual warehouse components on a separate system.
While it might appear more cost-effective and easier — at least in the beginning — managing spreadsheets is tedious and prone to user errors. As spreadsheets need to be updated manually with any changes, you also risk losing your single source of truth with each update if data was not ported over correctly.
It’s also time-consuming as the sheet must be updated regularly to keep on top of orders. Such a system is also not easy to scale. As your business grows, more customers mean more items will need to be stored and tallied correctly, and more orders to pick and pack daily. That also means a higher time and labor cost.
This is where a warehouse management system comes in.
What Is a WMS?
A WMS is a software solution that offers visibility into a warehouse’s day-to-day activities, such as receiving, put-aways, picking, packing, kitting, and inventory control. It captures and records most, if not all, the daily operations in a warehouse, with some offering integrations for features such as mobile barcode scanning and online marketplaces to support fulfillment. But unlike an order management system (OMS), it does not accept orders from shopping carts, nor does it oversee the entire order lifecycle.
In essence, a WMS helps your operations team manage most of the day-to-day activities and small details in a warehouse so that your team can focus on more important tasks.
WMS vs. IMS
Most WMS are designed to handle inventory for multiple clients. While there is standalone inventory management software, it tends to focus more on managing the physical goods in the warehouse without the extra support for 3PLs.
| WMS | IMS | |
|---|---|---|
| Definition | A comprehensive, all-in-one system | A basic system designed for a single purpose |
| Capability | Includes outbound (shipping, order fulfillment) and inbound (receiving and put-away) processes | Mainly manages inbound processes |
| Main feature | Emphasis is on optimizing the entire warehouse operation | Emphasis is on handling physical goods |
| Accuracy | Provides accurate inventory counts in real-time. It can identify the shelf, bin, and compartment for specific items | Provides accurate inventory counts and general location of goods |
| Ease of use | Complex to learn but easy to manage once set up correctly | Easy to learn and manage |
| Flexibility | Able to manage workflows for multiple stations | Only handles simpler processes |
| Automation | Automates tasks | Limited automation, more manual touchpoints |
| Target user | Perfect for bigger businesses and warehouses with multiple customers | Good starting software for small businesses |
| WMS | IMS |
|---|---|
| Definition | |
| A comprehensive, all-in-one system | A basic system designed for a single purpose |
| Capability | |
| Includes outbound (shipping, order fulfillment) and inbound (receiving and put-away) processes | Mainly manages inbound processes |
| Main feature | |
| Emphasis is on optimizing the entire warehouse operation | Emphasis is on handling physical goods |
| Accuracy | |
| Provides accurate inventory counts in real-time. It can identify the shelf, bin, and compartment for specific items | Provides accurate inventory counts and general location of goods |
| Ease of use | |
| Complex to learn but easy to manage once set up correctly | Easy to learn and manage |
| Flexibility | |
| Able to manage workflows for multiple stations | Only handles simpler processes |
| Automation | |
| Automates tasks | Limited automation, more manual touchpoints |
| Target user | |
| Perfect for bigger businesses and warehouses with multiple customers | Good starting software for small businesses |
How does it help?
A WMS is designed to solve some of the most common warehouse problems. It makes inventory management much faster, easier, and more efficient.
Here are some of its benefits.
It ensures inventory accuracy.
Accuracy is king when it comes to inventory management. In fact, the recommended accuracy rate for 3PLs is 99%. A WMS can track stock levels of products on the shelves and even be configured to send alerts the moment an item is low, helping you stay on top of changing stock.
It allows easy inventory tracking.
Any item that passes through the warehouse will likely have passed through multiple stations and touchpoints. A WMS can track this automatically and create a record in the system that your team can refer to if needed.
It increases productivity.
WMS uses automation and smart management features to reduce manual touchpoints and shave time off tedious processes. Workers can do more work in less time because they’ll have exactly what they need at the right time.
💡 Tip: Maintaining high productivity is especially key during peak season. Pay attention to your inventory control, order fulfillment efficiency and accuracy rates.
To know more about which areas to focus on, read our blog post on how to increase warehouse efficiency ahead of peak season.
It maximizes your
warehouse space.
Having enough storage space is a big challenge for any warehouse. A WMS can help you maximize your storage space by highlighting available spaces and providing recommendations, making receiving and picking much easier.
It increases transparency.
A WMS makes processes like receiving, order fulfillment, and shipping completely transparent to your team and your customers, offering real-time visibility into stock. This information can be shared with your customers, reducing complaints and enhancing overall customer service.
Still Unconvinced? Hear Top 3PLs in the Industry Vouch For A WMS
A good WMS takes the burden of managing inventory off your operations team, freeing them to dedicate more time to other matters.
Here are some testimonials from 3PLs who made the switch and saw big improvements:
SECTION 3
15 Tips to Improve Inventory Management
Inbound
Plan ahead for inventory deliveries with advance shipping notices.
Too many simultaneous deliveries can clog up your dock and put pressure on your team. Avoid this by having your customers send advance notice of when their replenished goods will arrive so you can plan shipments around them and process them quickly upon arrival.- Use automated put-away recommendations to maximize space.
Can’t seem to find available space for new items? A WMS can be programmed to locate and suggest put-away locations based on availability and proximity to the dock. You can also use built-in quality controls to confirm that inventory has been placed in the correct location.
Outbound
- Use built-in integrations to capture orders faster.
Too many simultaneous deliveries can clog up your dock and put pressure on your team. Avoid this by having your customers send advance notice of when their replenished goods will arrive so you can plan shipments around them and process them quickly upon arrival. - Group orders in a smart way to maximize pick throughput.
A great way to optimize your picking workflow is to use batch picking for orders with similar steps. For example, a WMS can automatically batch single-piece orders or batches of identical orders, so workers minimize their travel. This way, you can reduce travel time and organize work in a smarter way.
💡 Tip: A WMS with intelligent automation will allow you to create batches based on rules you define. These rules will also determine how and when you want the work completed.
There are two common examples of how batch orders can work:
- Release batches into the warehouse at specific times –
match pick-up times for shipping and never
miss SLAs. - Release batches with specific packing instructions –
group orders with similar steps and give your team quick, repeatable steps to speed up packing.
- Use barcode scanning to prevent stock errors and improve QC.
Use barcode scanning during packing to ensure that the right product is being packed for the right order quickly and accurately. Consider cluster picking or setting up a dedicated QC/packing station. - Minimize travel time by creating a smart path through the warehouse.
Stop your workers from making unnecessary trips. A WMS can create a logical walk sequence for workers to spend more time picking and less time walking. - Offer quick, flexible shipping.
With so many carriers and shipping methods on the market, it’s essential to keep up with demand. Set up your WMS to generate shipping labels with preferred carriers or a multi-carrier TMS – this will help minimize errors and get orders out quickly.
Inventory Control
- Ensure real-time visibility into warehouse inventory with barcode technology.
When a barcode is scanned, item data is immediately updated and visible in the WMS. This allows your team to see updates on the go as soon as any transaction is made via a wireless device. - Track minor revisions or version changes to a product with lot control.
Particularly important for perishable products, lot control provides granular tracking of inventory lots or items with expiry dates. This will help you track batches of similar items and make recalls easier as the WMS identifies which orders included recalled products. - Automatically replenish forward-picking areas.
Program your WMS to automatically trigger replenishment from bulk to a forward picking area as inventory levels get low; that way, pickers aren’t surprised by an empty area. This is particularly important for fast-moving products. - Create an audit trail for each time inventory is touched.
A WMS can log all transactions, creating a record that includes the time, date, and name of the worker responsible. This helps you ensure accountability and complete transparency in each customer order.
Kitting
- Plan your kit assembly only to build and store what is necessary.
Kits can take time to assemble and require additional storage. Use your WMS to assemble kits efficiently and track inventory going into the kit. Consider using features like granular lot tracking for product recalls, perishables, or time-sensitive documents. - Automate the kitting process to define how kits are handled for each customer.
A good WMS will enable you to set parameters for handling kits. For example, set a manual pre-assembly for a large quantity of kits required at a set time or automated pre-assembly for customers who require a set number of ready-to-ship kits.
Reports and Dashboards
- Use dashboards to stay on top of what’s going on in your warehouse.
A WMS dashboard gives you a wide view of daily workloads and active orders. Use it to keep up with orders that need to be shipped out and strict SLAs. - Get customers important information when they need it.
Real-time access to data is essential for both you and your customers, which is why flexible reporting is so crucial to warehouse operations.
A good WMS will allow you to build custom reports on demand. Help your account representatives process service tickets quickly by giving them access to information like order details, product summaries, and daily receiving logs. Simultaneously, satisfy your customers’ specific reporting needs by creating customized reports with the data they want in the format they need.
You can also use this data for internal reporting and ensure your warehouse runs optimally.
💡 Tip: A WMS tracks inventory and daily operations. But if you want to know how your business is performing, consider monitoring your KPIs.
The most important KPIs for inventory management are:
- Inventory accuracy –
prevent common inventory issues and ensure you don’t accidentally run out of stock. - Average inventory age –
monitor your turnover and predict buying behavior and demand.
Take Control of Your Inventory Today
Effective inventory control is key to running a tight warehouse. It requires a vigilant team, keen attention to detail, and constant monitoring of all processes. This is where a WMS comes in.
But not all WMS or inventory management systems are built the same. Here’s a checklist↗ you can use when assessing your software to see if it can handle everything you need it to do:
| Does your current software or system have: | Yes / No |
|---|---|
| Inbound | |
| Advanced shipping notices? | |
| Automated put-away recommendations? | |
| Outbound | |
| Built-in marketplace integrations? | |
| Smart order batching? | |
| Barcode scanning for QC? | |
| A logical walk sequence generator? | |
| Shipping options and label generation? | |
| Inventory control | |
| Barcode technology for inventory control? | |
| Lot control? | |
| Automatic forward-picking area replenishment triggers? | |
| Full tracking for every time a product is touched? | |
| Kitting | |
| Kit planning? | |
| Kit customization for customers? | |
| Reports and dashboards | |
| Warehouse management dashboards? | |
| Flexible reporting? |
If your current system lacks these key functions, consider switching to something more robust. VeraCore’s smart warehouse management suite is the foundation of our smart 3PL fulfillment platform. With just one platform, you can streamline key touch points within your warehouse operation and eliminate any inefficiency so you can focus on getting the right product to the right person at the right time.
Read about how our clients
saw a noticeable difference after switching to a fully-featured WMS.
Warehouse and Order Management for Third-party Fulfillment
See how we help third-party fulfillment warehouses eliminate inefficiencies in their operation with software that allows their business to thrive and keeps customers happy.
Scheduling Your Veracore Fulfillment Demo Is Easy
And gain better insight to upscale your 3PL fulfillment operations.
Warehouse and
Order Management for Third-party Fulfillment
See how we help third-party fulfillment warehouses eliminate inefficiencies in their operation with software that allows their business to thrive and keeps customers happy.
Scheduling Your Veracore Fulfillment Demo Is Easy
And gain better insight to upscale your 3PL fulfillment operations.