21 mistakes adding cost and killing productivity in your warehouse - #1

Too many deliveries kills productivity &
adds cost to your warehouse operation

#1. Too many inbound          deliveries

We are all for more frequent deliveries of inventory as this is one of the key strategies to reduce overall inventory levels and free up capital for more productive investments.  However it is possible to take this too far.  Each receipt costs money in labour, dock and equipment utilisation, and depending on your put-away strategies , too frequent deliveries of the same item can fragment storage of the same item to many locations in your warehouse wasting lots of space.  

Frequent deliveries can result from poor inventory planning leading to chronic stock-outs, back-orders and frequent re-ordering.  Buy to order strategies may appear to be efficient but can actually add cost by churning the receiving process.  Buy to order is great when you apply it to the slow selling long tail of your product range, it is not such a good idea for more frequently sold items.

One of the measures of churn is called stock turns.  You can calculate your stock turns very simply by taking your total sales and dividing by your average inventory on hand.  So for example if you have sales of $10M per year and an average inventory holding of $1M then your stock turns are 10.  Another way to think of this, is in terms of how many days or weeks of inventory you are holding.  In this example 52 weeks in a year / 10 turns equals and average inventory holding of 5.2 weeks.  

Whether your number is good or not can really only be determined by comparison against others in your industry, as each industry will have its own set of constraints that will impact the stock turns.  If your stock turns are in the 20-30 range then you are doing pretty well, anything over 30 is excellent, but if it’s over 50 then you are most likely churning!  You should measure your stock turns as a fundamental business KPI, generally the higher the number the better.  Detailed analysis by product groups and items will show you where you need to focus your attention.

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