Inventory management is an age-old practice on the verge of a serious technology upgrade. For as long as people have stored goods in buildings, they’ve kept a careful count of the total. And today more than ever, that’s a critical part of any warehousing fulfillment operation. Accurate counts enable top performance in stocking, slotting, throughput, replenishment, lean operations, next-day delivery, risk management, and other areas. But in recent years, that job has gotten tougher, under pressure from trends like the surge in e-commerce, the proliferation of stock-keeping units (SKUs), demand for value-added services like kitting and packaging, and the rise of omnichannel fulfillment.
And yet, in 2024 there are still huge disparities in the ways that different warehouses perform cycle counts. At the slow end of the scale, a company might shut down a distribution center once a month so armies of employees can walk through with pencils and clipboards conducting a multiday count. In the mid-range, some operations use their warehouse management system (WMS) to conduct rolling counts throughout the week by keeping track every time a bin is marked empty or is refilled. And on the fast end, some cutting-edge warehouses are experimenting with autonomous drones that fly over the aisles every day, producing gigabytes of real-time digital data that flows seamlessly into their WMS or enterprise resource planning (ERP) software.
But whatever approach DCs are using to manage their inventory, there is definitely room for improvement. A consumer survey by third-party logistics service provider (3PL) Radial shows that many retailers struggle to meet challenges like the annual winter holiday peak and ongoing supply chain instability. The resulting inventory shortages create lingering frustrations for consumers. Radial’s research found “out-of-stock items” was the top holiday shopping challenge for 68% of consumers this past peak season. In addition, 44% of shoppers surveyed said they simply did not order items that would not arrive by a specific date.
There’s a lot at stake: Many of those shoppers won’t give a retailer that disappoints them a second chance. If a smaller store can’t deliver, consumers will often shop with competitors who have inventory available and are able to deliver it on time. Radial’s survey found that big-box retailers tended to be favored when item availability was a concern—64% of consumers chose to purchase holiday items from Amazon due to the availability of items, for instance, and 47% chose to purchase holiday items from Walmart or Target for the same reason.
The problem is particularly painful for small and medium-sized businesses (SMBs), according to a recent “State of Small Business Report” from Verizon Business. That research found that 40% of retail SMB owners say they are worried about not having enough inventory to meet demand, even as 36% say they are worried about having too much. Either problem is painful, with stockouts leading to lost sales and excess goods driving up storage fees.
Fortunately, there are ways companies can get a better handle on their inventory. These include the dazzling tech tools that seem to be hitting the market daily. But those tools aren’t the only solution. Experts say that in some cases, simple low-tech process improvements in certain areas of the warehouse can deliver big gains in accuracy. What follows is a look at a few of the options.
THE NEED FOR SPEED
On the tech tools front, developers continue to roll out solutions that incorporate robotics and other advanced technologies—like artificial intelligence (AI) and digital twins—that are aimed at boosting inventory accuracy and optimizing inventory levels. One such company is Dexory, a British startup that specializes in autonomous mobile robots (AMRs) that are outfitted with mast-mounted sensors that scan stock and are backed by AI-powered analytics software.
Dexory says its robots can record up to 10,000 pallet locations per hour, gathering data with cameras, scanners, and LiDAR (light detection and ranging) technology while rolling down warehouse aisles at walking speed. But its most powerful product is the digital twin the system creates with that information, allowing Dexory to compare real-world data with the records stored in WMS and ERP systems.
The resulting visibility delivers more than just accurate counts, since users can also inspect markings like the barcodes, logos, or expiration dates on each item. And third-party service providers can use the data to meet their service level agreements (SLAs) to provide cycle counts at the extra-high frequencies demanded by customers that produce valuable items like electronics or pharmaceuticals, says Oana Jinga, Dexory’s co-founder and chief commercial and product officer.
Like other providers of inventory-counting bots and drones, the young firm has delivered its technology to only a small percentage of the players in the warehouse market so far, but it is growing fast. Dexory raised $19 million of venture capital funding in 2023 and has deployed its robots this year at logistics facilities operated by DB Schenker and Yusen Logistics.
WATCH THE SPEED BUMPS
Fast counts are great, but automation can’t solve every inventory-counting challenge. That’s partly because a busy DC is often a chaotic DC, where the daily rush to fill orders produces piles of discarded wrapping, packaging, and pull sheets.
While that may not be much of a problem in static bulk storage areas, it can be a real challenge in parts of the warehouse that handle high volumes or see a lot of high-touch transactions, according to Nate Rosier, senior vice president of consulting at enVista, an Indiana-based supply chain consulting firm.
For example, accuracy tends to take a hit in situations where workers are slotting multiple SKUs in a single location, or where they’re picking fast-moving “A-level” goods as opposed to slower-moving B- or C-level items.
“High-velocity pick locations are messy,” Rosier says. “There are boxes and stickers everywhere.”
Another trouble spot when it comes to tracking inventory is the delivery dock, where stock may be on hand but not yet “available.” “You have goods that are somewhere between receiving and putaway. Or their status could be “in-transit.” So you don’t want to pick items directly out of receiving,” he says.
A third danger zone with respect to inaccurate counts is a busy picking location with the potential to “run dry” in the middle of a shift, Rosier says. “If they run out of inventory, a lot of workers will do a workaround, they’ll get creative. In the beverage industry, it’s called ‘shagging’ because people will say, ‘I’m short a case for this order; go shag it from somewhere else in the building.’ And then your count doesn’t add up the next day.”
But there are at least a couple of ways to address that, according to Rosier.
“You can’t count ’em all, so smart warehouse managers will prioritize,” he explains. For instance, “they’ll see that their pickers are all done picking for the day, so they’ll tell them, ‘Go cycle-count all the A-level items before you finish replenishment. That way, you’re ready for the next shift.’”
Another strategy is to assign ownership of busy locations to the supervisors who manage those areas, he adds. “The people who run those spots know where the risks are,” he explains. “So talk to your workers and your supervisors. Tell them, ‘You’re responsible for your whole area—not just for shipping stuff out the door, but replenishment too.’”
For DC leaders facing mounting inventory challenges, the takeaway is this: Whether high-tech or low, creative solutions for managing inventory abound—and they can help warehouses of all shapes and sizes get a better handle on their storage and fulfillment operations.
