Inventory Management for a Fulfillment Operation

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When managing a fulfillment business, it is important that the company has Standard Operating Procedures for Inventory Management, and that they are executed with precision 100% of the time.  There are multiple levels to managing inventory and keeping an accurate count of inventory.  Keeping an accurate inventory starts before the product arrives and ends when the final product leaves the building.  If a company does not keep an accurate inventory count it can cost the company sales and a good relationship with the customer.

The first thing a fulfillment business should provide is Standard Operating Procedures for the employees to follow when creating and receiving inventory, processing orders, cycle counts, and inventory transactions.  Giving the employees a handbook or guide to performing inventory transactions allows for clear communication and expectations.  Training the employees before they execute these tasks and ensuring they have a complete understanding of what is expected is key to any fulfillment operations success.

The nest portion of Inventory Management is the creation of a sku in the company’s Inventory Management System.  In FulfillMe’s system, we ask the customer to provide us with a list of sku’s that need to be created and the associated information for the product.  Some additional information you can add to the system to help with the tracking of inventory is the UPC barcode, Pricing, Harmonized Tariff Codes, Weight, Size, and how the product should be selected (First In First Out, First Expiration In First Expiration Out, or Last In First Out).  If a product is not set up correctly, it will only cause issues for tracking in the future.

The next portion of Inventory Management is the receiving of an item.  At FulfillMe we require the Client to provide a Purchase Order before the product is shipped to us.  Once the product arrives at the facility, collecting a full inventory of what came in versus the Purchase Order is taken.  Any discrepancies, damages, or issues are then reported to the Client so that they can resolve the issues on their end with the supplier.  If a Fulfillment company does not obtain an accurate inventory of an incoming receiving, then the inventory will not be accurate.  It is imperative that this step is done accurately, and timely.

Another critical piece to Inventory Management is establishing a Cycle Count Program.  When establishing a Cycle Count Program is important to find out the expectations with the client of how often they would like their products counted.  Companies can approach the number of cycles that inventory is counted in multiple ways.  Some companies only require that their inventory is counted once a year for accounting purposes.  Other companies will have their product counted once a quarter, monthly, or even weekly depending on how they view the importance or impact that the accuracy is.  The more often an inventory is counted, allows for a fulfillment operation to catch a mistake, and correct it.

At FulfillMe we have handheld scanners that help us with counting the products during a cycle count.  Using technology is an important piece of Inventory Management.  When FulfillMe picks an order for a customer, we use a handheld scanner that tells us where the product is located.  The handheld scanner requires us to scan the barcode to ensure the correct product is being picked.  If the incorrect item is selected, this is where inventory will be incorrect and not corrected until a cycle count is performed.

A great piece of Inventory Management is the statistical and analytical side.  Having an accurate inventory allows for a company to dissect its business and create plans for the direction of the business.  Knowing what product, you have on hand can allow a business to understand what product it needs to meet sales demands.  Analyzing your on-hand inventory is important to any business and if it is not accurate it can negatively impact its ability to operate.

In conclusion, there are many important pieces to maintaining an accurate inventory for a fulfillment operation.  It starts at the beginning when a company creates an item, and receives it, to how they process the orders and cycle count the inventory.  It is critical for any company to maintain an accurate inventory so that they can sell their product and analyze its business.  Without proper Inventory Management a business will struggle to be successful.


Scott Clark