Does your warehouse need more structure?

Many years ago, I forgot to step back when my company was looking for someone to manage inventory.  As a result, I got the job because I was the one standing in front of everyone who stepped back.  At the time, I was working for a national retail chain with over 900 locations.  I took advantage of my new role and I learned how to plan, staff, supervise and reconcile physical inventories.  Inventory control does not happen on inventory day.  Inventory control is a team process that happens every day.  Everyone who touches inventory is part of that process.  That includes the individual who places the purchase order, the person who receives the inventory, the person who puts the inventory away, the person who pays the invoice for the inventory, the person who replenishes the shelf or bin, the person who sells or ships the inventory to the customer, the person who completes the physical inventory and the person who reconciles the physical inventory.

Inventory management is a job many people avoid.  Even company owners seem to avoid inventory management.  Consider this, from the past 20-plus years in the NAV/BC world, I have worked with over 100 different customers.  Prior to my involvement with those customers, some had not taken a physical inventory in more than a year.  For many, of those who had taken an annual physical inventory, we're constantly making inventory adjustments throughout the year to correct errors from the last physical inventory.  I had one owner ask me, “Why do I need to take an annual physical inventory?  I have to shut my operations down for a day and then I make inventory adjustments all year long.”

If you are a small privately owned company, you may feel comfortable skipping physical inventories.  But you lose out on the opportunities to update quantities on hand, to adjust the cost of goods sold and taxable income for inventory shortages, and to identify and shore up issues causing those inventory shortages.  If you are a large and/or publicly owned company, you can’t avoid physical inventories.

Why is a physical inventory seen as a chore equivalent to cleaning toilets?  Attitude is everything.  If you treat it as an undesirable task, your staff will view it in the same light.  Tasks performed begrudgingly are seldom performed well.  So, let’s talk about what you can do to make this a less frenetic effort.

Shelf No.

If you have a small number of items in your inventory and one small warehouse, you may be able to utilize the Shelf No. on the Item Card to assist in the physical inventory.

This field is a text field, limited to 10 characters and there is no validation.

Physical Inventory Journal

Keep in mind that when you Calculate Inventory to populate the Physical Inventory Journal, Business Central without a modification, will populate the Journal Lines in Item No. order.  The Count Sheets are printed in the same order as Journal Lines.

That means to make the counting process more efficient, you need to store your items in Item No. order or the counters will be jumping around on their count sheets as they move through the shelves.

If you have a larger number of items and multiple locations, (different warehouses), you could still utilize the Shelf No. on the Stockkeeping Unit of each Item in that Location.

But again, without a modification, the Journal Lines in the Physical Inventory Journal will be created in Item No. order and subsequently the Count Sheets will be printed in Item No. order.

Using the Shelf No. field is not a practical solution if you have a large number of Items, and you add new Items throughout the year.  As you add new Items, the person creating the new Item is not usually the person who will be putting the new Items away when they are received.  And the person who puts the new Items on shelf may not have permission to update the Item and/or Stockkeeping Unit.  This means the new Items or new Stockkeeping Units will probably have an incorrect Shelf No. or no Shelf No. at all.

Bin Code

And that brings us to the Bin Code.

Are you one of the many companies that have at least one location with more than a couple thousand Items, but you are not using the Bin Mandatory functionality?  If so, you are not alone.  I have observed multiple customers taking inventory with more than 10,000 items in a location without Bins.  It is painful to watch and makes recounting extremely difficult.  Just because others don’t use this functionality means you should forgo a tool that gives structure to your warehouses and improves inventory counting accuracy and efficiency.

The Bin Mandatory functionality is easily activated, and you do not need to activate any additional warehouse functionality when you start using Bins.  If you have multiple locations, you can implement this feature one location at a time.

Once you activate the functionality for a location, you can convert all your Shelf Nos. to Bin Codes for that location and future physical inventories will become more efficient.  With Bin Mandatory, that physical inventory you take to update Bin Codes for the Items on hand can be your last full warehouse inventory.  Going forward, you can begin using cycle counts instead of counting the entire warehouse at one time.

Additional benefits from the Bin Mandatory functionality include Sales Lines on Sales Orders displaying the Default Bin Code where the Items should be picked and Purchase Lines on Purchase Orders displaying the Default Bin Code where the Items should be put away.  With Bin Codes, Items can have additional backstock Bins so Items can be counted in different Bins.

Yes, you can complete a physical inventory without Bin Codes.  But why put your staff through that painful exercise?

It only takes one physical inventory to convert to Bin Mandatory.  After that, the process becomes more manageable, more efficient, and less stressful for the staff.

Be sure to check out my next blog in which I discuss more warehouse functionality.