Warehouse Inventory Management: The Ultimate Guide




Warehouse inventory management is more than putting products on shelves.


Effective warehouse inventory management is dependent on organized processes so your team can reduce errors and improve productivity. It’s about increasing accuracy in order to maximize your warehouse team’s time and save money for your organization.


Even though your customer may never step foot in your warehouse, they will certainly feel the effects of a disorganized versus an organized warehouse process. A messy process can lead to mountains of errors, missed delivery dates, and unhappy customers. On the other hand, a strong warehouse inventory system and process means items are stocked, selected, and shipped quickly with minimal errors. An organized process results in a great experience for your customers when they receive their deliveries on time, every time.


The way you set up your warehouse will make or break the success of your team’s ability to accurately and quickly pick and ship products.


In this guide, we’ll explore the differences between inventory and warehouse management, the best practices to follow for effective warehouse management, and the benefits of using an inventory management and tracking software.


Inventory Management vs Warehouse Management — What’s The Difference?


Whether you’re a wholesale distributor or a small business, one thing is crucial to your business — its inventory.


Inventory management is the process a business follows to track the flow of product from manufacturers to warehouses then from these facilities to the customer. Inventory management requires you to track the amount, weight, and location of your company’s stock.


While inventory management considers the entire supply chain, warehouse management is the process of tracking and managing the products, employees, and systems within your warehouse(s). Warehouse management encompasses everything that happens in your warehouse including incoming freight, inventory tracking, logistics, employee training, packing and shipping systems, and the management of returns or damaged goods.


These two processes are essential to your business, but have different and important functions. Close alignment between the two will result in the ability to centralize orders, inventory, and sales in order to streamline operations and ensure an excellent customer experience.


How To Organize And Optimize: Warehouse Inventory Management Tips & Best Practices


A successful business with happy customers starts with buttoned-up business processes. Taking the time to organize and document processes, warehouse management systems, employee training, and customer service expectations will feel burdensome at first, but will result in fewer errors, faster turnaround times, increased sales, and a delightful customer experience. Clear and organized processes and protocols are particularly important if your company has more than one warehouse.


Follow these best practices to create, organize, and optimize a warehouse inventory management process that will keep your team out of trouble and on track to hit important inventory KPIs.


1. Identify the location, location, location


Just like a new home, location is everything. The physical location of your warehouse should make sense for your business and customers. You will need to consider the cost of rent or purchasing the warehouse space, the cost to ship product from the warehouse location, and the cost of labor in the chosen location.


Location also involves the interior of your warehouse. A well-designed warehouse will improve your inventory turn ratio. Your team should strategically decide where certain products are placed within the warehouse. For high selling items, make those the most accessible to your pick and pack team. For high-volume SKUs, you’ll want to consider setting up multiple pick, pack and ship locations. Items that are less frequently sold can be placed in a less accessible area.


As you build or re-evaluate the layout of your warehouse, ask the following questions during the process:

  • Does the layout utilize space efficiently?
  • Are paths and shelves organized correctly and safely?
  • Do employees have enough space to perform their responsibilities?
  • Are high selling items easily accessible?
  • Is there a dedicated space for damaged goods and processing returns?
  • Where does it make the most sense to place the pack and ship area?

Once your team is working day-to-day in your warehouse, perform a monthly or quarterly analysis to evaluate if the layout is efficient. Provide opportunities for your warehouse workers and managers to give feedback on improvements to the warehouse layout.


2. Establish a labeling and barcode system


A strong warehouse inventory system makes it easy for warehouse workers to quickly identify the location of products. There’s no rummaging and rushing involved when you use labels and barcodes on your inventory.


Not only should inventory be labeled — your warehouses aisles and shelves should have clear labeling.


3. Follow the FIFO (First In, First Out) method


This is a simple yet important best practice. First-in-First-Out is exactly what it sounds like: as you receive like items or SKUs in your warehouse, the oldest items should be shipped out first.


4. Perform random pick and pack checks


Even if your processes and systems are organized, human error can still occur, resulting in a less than stellar customer experience. Your warehouse managers should perform random pick and pack checks, especially with new employees, to ensure shipments are accurate. These checks will allow your team to maintain the quality assurance expected of your business.


5. Make safety and employee training a priority  


According to Occupational Safety and Health Administration (OSHA), most general industry incidents involve slips, trips, and falls. They cause 15% of all accidental deaths, and are second only to motor vehicles as a cause of fatalities.


It’s important to plan ahead and provide safety processes for your employees, especially if they are dealing with equipment in your warehouse.


Employees should wear the right clothing, footwear, and headwear to protect their bodies and others from harm. If you have employees operating heavy machinery or lift equipment, they must be trained and certified to use these machines. In addition, your loading and unloading dock should be fitted with the right dock plates and boards to aid delivery drivers in getting receivables right up to your door. The right equipment aids in a safe working environment, so be sure to buy what is recommended by OSHA to make your warehouse a safe place to work.


You can ensure these safety standards take effect in your warehouse by hosting mandatory training sessions to show workers the correct way to use the equipment needed to perform their job.


6. Schedule time for tidying and organization


A safe warehouse is reliant on an organized workplace. As you and your warehouse managers build worker and production schedules, buffer in time between employee shifts so they have enough time on the clock to organize and tidy their workspace. A clean warehouse will also reduce accidents.

7. Use a state-of-the-art inventory management software


Thanks to robust SaaS software, you and your team no longer have to rely on a few key team members and a spreadsheet to track, manage, and locate inventory.


An automated inventory system provides several benefits such as a centralized order and fulfillment process, automatic updates to inventory stock levels, ability to generate pick and ship instructions, including bin numbers and location, and shipping labels. Overall, the right inventory management software helps you track receivables, manage ongoing inventory and outbound orders, and shipments.


Selecting the Right Warehouse Inventory Management System


When it comes to managing your warehouse, there are several moving parts to track. You need to keep track of product stock levels, associated SKUs, COGS (Cost of Goods Sold), sell-through percentage, sale price and margins. It’s common to start the management process with a warehouse inventory management template. It’s effective in keeping track of important information related to your inventory like associated SKU, COGS, sell-through percentage, and stock levels.


However, this process is entirely manual. As your business grows and you make plans to scale, cumbersome spreadsheets aren’t a sustainable solution.


The right inventory management system can solve this problem through automation, especially if it’s implemented and incorporated into your business, inventory, and warehouse processes early on.  


As you’re analyzing which inventory management software will work best for your business, make sure it has these warehouse-specific features and capabilities:

  • Unlimited matrix of real and virtual warehousing
  • Barcode and label creation and scanning
  • Automated order fulfillment and alerts
  • Ability to use the software on tablets and mobile phones
  • Advanced returns capabilities


Systum is a single platform that replaces all the software you use to engage and support your customers while also providing real-time visibility into your business. Systum easily integrates with marketing, CRM, sales automation, e-commerce, inventory management and quoting and billing software tools.


With robust  analytics and business intelligence, Systum helps small business owners see the status and health of their company through simple dashboards. This keeps you and your team organized in the back of the house so you can focus on delighting your customers.

If you’d like to learn more about how Systum helps with wholesale inventory management (and beyond) check out our all in one business software here.


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