Any logistics company will tell you that the larger the warehouse, the higher the cost of staff and real estate. In fact, they are the two biggest outgoings facing warehouse operators, and the ever-increasing velocity of supply chains, and relentless need for higher operational efficiency means the need to incorporate technology and task automation into the process is greater than ever.
Although the use of automation technology in warehousing is relatively new, it has already shown it has the ability to revolutionise supply chains in a range of applications – including inventory counts.
Failure to undertake full or random counts, or doing so infrequently or inaccurately, puts distribution centres and 3PLs at risk of upsetting customers and losing market share. By automating this time-consuming and costly process, you can be confident that your operation is protected against those risks.
Cost of full counts vs insufficiency of random counts
Let’s take, for example, a warehouse facility that typically stores 10,000 pallets, all of which must be part of a monthly cycle count. You’re likely looking at around 100 human hours per month; that’s 1200 hours per year on cycle counting – an unavoidable but non-revenue-generating task. Add in the possibility of an increased number of pallets and/or an obligation to increase the cycle count frequency, and it’s not hard to see how staffing hours (and cost) associated with cycle counts can quickly spiral.
As a result, many warehousing operations opt for random cycle counts instead – trading accuracy for time and cost savings by counting a small sample of total inventory and extrapolating the results to arrive at a theoretical full count. Needless to say, this method has the potential to introduce big inaccuracies.
Warehouse Management Systems (WMS) can help to reduce these inaccuracies to some extent by informing warehouse managers which locations should be counted, how often and when, based on location inaccuracies observed in the past – but any system involving manual counting will always involve climbing ladders, using MEWPs, and struggling with hard-to-reach rack locations.
When it comes to manual inventory counts, there’s always a compromise – whether it’s cost, accuracy or staff safety.
Inventory audits are a necessary evil
No matter how time-consuming they may be, inventory audits are a necessity.
Quarter-end and year-end inventory audits are a way of life for many warehouse operations. Financial regulations require that the entire inventory be accurately accounted for so that the corresponding line items on the company’s balance sheet are correctly reported in the accounts.
These inventory audits tend to be resource-intensive and extremely disruptive to normal business; besides the full-time resources involved in daily activities, an army of part-time and/or over-time staff are usually brought in to bolster the labour capacity in a bid to minimise the time the warehouse operation is shut down.
The fact is, the lower the frequency of periodic cycle counts, the more challenging the audit is, since there are likely to be a greater number of discrepancies between what’s logged in the WMS and what’s physically on the shelves.
And on top of the time and cost – for both labour and equipment – physical inventory audits have numerous other negative knock-ons:
- The entire facility will usually need to be shut down during the audit, impacting the operation’s ability to meet their fulfilment metrics
- Stock differences highlighted in the audit will usually need to be investigated and resolved straight away, increasing the warehouse shutdown even further
- Audit queries may be hindered even further thanks to the inherent lack of accuracy and repeatability coupled with the lack of traceability of manual counts
Inventory counts don’t just impact certain organisations
For many warehouses, inventory audits are an inescapable regulatory obligation. But if your organisation doesn’t have such requirements, that doesn’t mean you’ll be free of audits – most 3PLs will have SLAs in place that require internal or external audits, and those will be subject to the same pitfalls encountered by any other warehouse manager taking part in an audit.
The driver behind these counts is inventory accuracy rather than financial regulation – customers are reliant on data from their logistics provider in order to better manage their supply chain. As a result, infrequent and/or inaccurate inventory counts are unacceptable for 3PLs looking to meet and exceed SLAs.
Luckily, drones have the answers!
Whether for regulatory requirements or customer SLAs, inventory counts will continue to be a necessary and inescapable evil, riddled with cost implications and inherent risk (be it reputational, safety or financial).
Fortunately, autonomous drones and intelligent software – such as those contained in the inventAIRy XL solution – provide the perfect solution for these long-standing problems. Full-cycle counts for quarter-end and year-end audits are not only more manageable, but come with increased accuracy and without the need to shut down entire facilities.
Drones are able to execute inventory management tasks at least 90% faster and 70% cheaper than traditional methods – meaning the Return On Investment for drone implementation in the warehouse is achieved in months, not years!