How to Manage Inventory with Multiple Warehouses

What is multiple warehouse inventory management?

Multiple sales channels, multiple warehouses, multiple headaches.

If you’re like many vendors who have more than one sales channel but no good way to manage inventory in multiple warehouses, there is an easy way to do it.

Welcome to the future of streamlined supply chain operations – Multiple warehouse management. In the ever-evolving world of logistics ,this approach isn’t just about managing stock; it’s a dynamic strategy aimed at enhancing efficiency, reducing costs, and improving overall customer satisfaction. With businesses expanding globally and e-commerce setting new standards, the need for multiple warehouse management has never been more pressing.

Benefits of a Multi-Warehouse Inventory Management System

In the fast-paced realm of inventory management, businesses are increasingly turning to multi-warehouse systems to revolutionize their supply chain strategies. Embracing this dynamic approach doesn’t just mean having more storage spaces; it’s a game-changer that brings a plethora of benefits to the table.

1. Rapid Order Fulfillment

Multi-warehouse systems enable businesses to strategically position their inventory closer to customers, slashing delivery times. This not only enhances customer satisfaction but also propels businesses into the realm of same-day and next-day deliveries.

2. Cost Optimization

By strategically distributing inventory, businesses can minimize shipping costs and reduce the overall operational expenses associated with long-distance transportation. This cost-effectiveness contributes significantly to improved profit margins.

3. Enhanced Resilience

In a world where disruptions are inevitable, having multiple warehouses acts as a safety net. If one location faces challenges like natural disasters or supply chain interruptions, others can seamlessly pick up the slack, ensuring continuity in operations.

4. Scalability and Flexibility

As businesses grow, so do their logistical needs. Multi-warehouse systems offer scalability, allowing businesses to easily expand their operations without the headache of restructuring their entire supply chain.

5. Real-time Visibility

With advanced technology integrated into multi-warehouse systems, businesses gain real-time visibility into their entire inventory network. This transparency enables informed decision-making, preventing stockouts and overstock situations.

10 Best Practices for Effective Multiple Warehouse Inventory Management

1. Warehouse view and set-up

In creating a combined warehouse, you have the option of picking and choosing what inventory will go into it. You can limit to just Shopify and Amazon, or use them both.

Your combined warehouse allow you to know the demand for both Shopify and Amazon. At this point, you need to consider what stock is tied to each sales channel.

Warehouse Set-up Scenario 1: Separate Warehouses with Separate Replenishment

If you are selling on Amazon FBA and Shopify, then those are different sets of stock to fulfill sales on each channel. In this case, you should view each warehouse individually and order what is forecast to meet demand at each location.

Warehouse Set-up Scenario 2: Separate Sales Channels with One Warehouse

If you use the same warehouse for your Shopify stock and selling via Amazon FBM. Since you have two sales channels but use the same warehouse, you will create a combined warehouse using sales information for building a joint forecast, but you will use only stock from one channel. If you are fulfilling your stock from the same warehouses, that must be taken into consideration, or else the stock will be double counted.

Warehouse Set-up Scenario 3: Two Sales Channels with Two Warehouses and Joint Replenishment

If you want one replenishment order for two sales channels in two warehouses, you will set up a combined warehouse incorporating sales and stock from both sales channels.

Say you order from an overseas supplier and will have the Shopify shipment delivered to one warehouse and part of the order transferred to an FBA warehouse domestically. Because you doesn’t want to pay excessive fees for Amazon’s warehouses, you only keep a small amount of stock there.

2. Replenishment Planning Period

The lead time is the amount of time that elapses between placing a purchase order and receiving products.

Days of stock is a period of time for which you’d like to have enough stock, or, in other words, the stock cover.

Combined, the lead time and days of stock are the total planning period.

You can set up lead time by warehouse. Your Amazon warehouse can have a different lead time than your Shopify or the combined warehouse.

You need to determine the lead time and days of stock for your combined warehouse in order to see an accurate forecast and replenishment recommendations.

Your lead time for your combined warehouse will cover the time it takes from placing a purchase order with your supplier to receiving that shipment. If you need to send part of that shipment from one warehouse to another, you should set the lead time for the destination warehouse as the time it will take to transfer the shipment.

Before using replenishment recommendations product lead times and days of stock should be configured.

For this example, Inventory Planner recommends that you purchase 36 units of the Mango dress that will arrive in 14 days if you places her purchase order today and will cover the following 30 days.

When in doubt, you should add additional days in the lead time period.

Read why we recommend increasing days of stock rather than using safety stock.

3. Determining Lead Time

Lead Time Scenario 1: The Lead Time Is Less Than Days of Stock

Days of stock can be seen as the frequency of purchasing. If you purchased your stock for 90 days, you should place your next purchase order for this supplier in 90 days, assuming that projected sales are correct.

When lead time is less than the cover, you don’t have to take immediate actions once your stock is arrived. For example, if you received products for the following 90 days and the lead time is 30 days, you have 60 days to do something else.

Lead Time Scenario 2: The Lead Time Is Equal to Days of Stock

In this case right after receiving products from a supplier. You should review your stock and place another purchase order.

Lead Time Scenario 3: The Lead Time Is More Than Days of Stock

This makes sense to use when your lead time is very long (longer than 90 days) and you don’t want to keep that much stock. In this case, you will always have multiple pending deliveries from each supplier.

Lead Time Scenario 4: Different Lead Times for Different Warehouses

For example: want to avoid Amazon’s long-term storage fees as much as possible, stay flexible, and send smaller amount of merchandise to Amazon. Therefore, your lead time at your FBA warehouse is only going to be seven days.

If you prefer to keep all but a seven-day Amazon supply at your Shopify warehouse, you’ll need frequent checks on your combined warehouses in Inventory Planner. Because the lead time for Amazon is so short, you can use the combined warehouse to gauge when you need to place an order with your supplier.

If you’re selling on both Shopify and Amazon, your combined warehouse must have a lead time that covers the full ordering cycle in getting merchandise to Amazon. Your supplier creates the order, ships it, sends it to your local (Shopify) warehouse, then you create shipment plans to Amazon in smaller amounts. You could wait as long as 90 days from the time you places the order with your Chinese manufacturer to the time it reaches your combined warehouse.

Another factor to consider is how long it takes to ship merchandise from the Shopify to the FBA warehouse. Do you need to allow for extra time to ship from one domestic warehouse to another, or would it be more efficient to have the FBA merchandise ship directly from China?

4. Strategic Warehouse Placement

Carefully choose the locations of your warehouses based on customer demand, transportation efficiency, and proximity to suppliers. Strategic placement reduces shipping costs, enhances delivery speed, and contributes to overall supply chain resilience.

5. Integrated Technology Solutions

Leverage cutting-edge technology such as RFID, barcoding, and warehouse management systems (WMS) to streamline processes. Automation reduces errors, accelerates order fulfillment, and provides accurate data for informed decision-making.

6. Standardized Processes

Establish standardized processes across all warehouses to ensure consistency in operations. From receiving and picking to packing and shipping, standardized processes enhance efficiency and simplify training for warehouse staff.

7. Cross-Training Staff

Cross-train warehouse staff to perform various tasks. This flexibility ensures that workforce shortages or sudden spikes in demand can be handled without compromising efficiency. A versatile team contributes to smoother warehouse operations.

8. Continuous Performance Monitoring

Implement Key Performance Indicators (KPIs) and regularly monitor warehouse performance. Track metrics such as order fulfillment times, accuracy rates, and inventory turnover. This data-driven approach helps identify areas for improvement.

9. Regular Audits and Cycle Counts

Conduct regular audits and cycle counts to maintain accurate inventory records. This proactive approach minimizes discrepancies, prevents stockouts, and enhances the overall reliability of your inventory data.

10. Supplier Collaboration

Establish strong relationships with suppliers and collaborate on inventory planning. Clear communication and collaboration help prevent delays, reduce lead times, and ensure a steady supply of goods to meet customer demand.

Summary

There are many factors to consider when determining replenishment and lead time: number of warehouses, time it take to receive from the manufacturer, sales velocity, and days of stock.

However, managing multiple warehouses and multiple sales channels doesn’t have to be a hassle. Creating a combined warehouse can help you navigate the lead time gamut from a 90-day wait from a Chinese supplier to a seven-day shipment from a Shopify warehouse to the Amazon warehouse.