LGT's Profit Sense

Whether you are a manufacturer or a distributor, operate in the United States or all across the globe, manufacture vehicle parts or distribute furniture – there is at least one common denominator – the warehouse. The warehouse is where the inventory comes in and where it goes out, where the sales orders are packed and where they are shipped – it is the heart of a manufacturing and distribution (M&D) company. Making improvements in warehouse controls can go a long way in increasing efficiencies and adding value to manufacturing operations. The following tips can help you improve your warehouse management operations.

Want to learn industry trends to stay in-the-know for your M&D company? Check out the top 9 manufacturing trends of 2023 from a manufacturing leader here.

1. Hire a qualified warehouse manager

First, hiring a qualified operations or warehouse manager is a great place to start to ensure your warehouse is being run efficiently and has proper oversight on a day-to-day basis. The warehouse manager sees all, and is the perfect person to identify what’s working well and what needs improvement. If you don’t identify what’s wrong, then improvements can’t be made, right? As such, someone needs to take control of identifying the inefficiencies and malpractices within the warehouse in order to set your company on the right path to improving the control environment.

2. Use an inventory management system

Do you have an inventory management system (IMS) that does everything you need it to? An IMS is a critical element of the supply chain and ensuring your warehouse is functioning properly. These systems can track inventory movement in real time using handheld scanners, including receiving, stocking, packing, and shipping. Integration of your IMS and accounting system is a must and eliminates lengthy reconciliations. Robust systems can even forecast demand or inventory shortages by tracking the items which sell most often and utilizing on-hand quantities to determine when you might run out. Lastly, always ensure your IMS comes with a dedicated support team to work out any kinks you may experience to keep your operations running smoothly.

3. Implement perpetual counts

If you’re currently only performing periodic physical counts, challenge your company to stretch the process to perpetual inventory counts. If you are using cycle counts, where only a certain number of inventory items are counted per day or per week, be sure your process ensures that all items are counted at least once within a year. A typical process for cycle counts, or even a full physical count of inventory, is to have warehouse personnel count a determined listing of items or SKUs using tags to identify the counted items and count sheets to record the results. Supervisors or the warehouse manager should then review and verify any discrepancies in the counts and appropriate adjustments should be made to the IMS to adjust the counts to actual.

4. Be clean and organized

Take the time and use the necessary resources to keep the warehouse as clean and organized as possible, not just for regulatory reasons, but because an organized warehouse facilitates faster customer orders with decreased lead times. Most time spent by warehouse workers comes in the form of transporting the inventory from place to place. From the loading dock to the shelves, from the shelves to the loading dock. As such, it is best to ensure that the inventory is organized in the most logical way to facilitate this transportation. For example, many M&D companies place the inventory with the highest demand closest to the loading bays and on the lower shelves, allowing warehouse personnel to pick it quicker and decrease the transport time. Inventory that is slow-moving or has less demand is stocked on the upper shelves farthest from the loading bays.

5. Write it down

Document processes and keep documentation updated each year based on positive and negative results of your warehouse management. A narrative documenting your processes helps not only with consistency, but smooths any transition of personnel by documenting the expectations for proper warehouse management.

6. Think SOX

Even if you’re a private company or small business that isn’t subject to the Sarbanes-Oxley (SOX) Act that applies to public companies, implementing a controls environment with SOX in mind not only mitigates the risks of material misstatement of your financial statements but enhances the value of the company for bottom-line impact or potential exit planning (selling the company or gaining investors).

Think of it this way

A warehouse should not only run efficiently, but also in a self-sufficient manner. As a business owner or manager, you want to be able to focus on strategies and forecasts, and not worry about the organization of your warehouse. After all, you’ll want to know you can leave for a vacation and know that processes are in place to mitigate the risk that something can go wrong. The value of your company will increase, and you’ll be able to sleep better at night. It’s all about having the right people and the right processes in place to ensure your business thrives!

Want to learn more about LGT and M&D? Read more about our manufacturing and distribution niche here!

Need help or have questions? 

Questions about how you can improve your manufacturing operations? Please comment us below or email us at askus@lgt-cpa.com.