Inventory management is a common struggle for supply chain organizations, even if they only run one facility. Bringing more storage locations into the equation introduces additional challenges but may be necessary to promote supply chain resilience. As more companies expand or embrace distributed sourcing, multi-location inventory management becomes a more prevalent concern.
Managing inventory across multiple locations can be challenging as it requires more communication yet features additional opportunities for inconsistency and error. However, that difficulty doesn’t mean effective multi-location management is impossible. Here are six strategies that make distributed inventory management easier.
1. Use a Digital Inventory Management System
Digitization is the first and most crucial step in improving multi-location inventory management. One survey found that 43% of small businesses use a manual method for tracking their inventory or don’t track it at all. That introduces significant room for error in any operation, especially in a multi-location model.
Recording inventory levels by hand is repetitive, laborious work, making it easy to make mistakes. Even if these manual records were perfect, this approach is too inefficient to work in a multi-location setup. Manufacturers that must adjust orders between two locations would have to reach out to both and wait for them to review their records, ensure they’re up to date and respond before making an informed decision.
Digitization removes many of those steps, offering faster insights. If all locations used a digital, cloud-based inventory system, manufacturers would simply pull up the website or app and see the needed information.
2. Implement IoT Tracking
Similarly, multi-location inventories should use the Internet of Things (IoT). IoT tracking solutions use wireless communication standards like Bluetooth, RFID, Wi-Fi or cellular networks to gather and transmit digital data in real time.
IoT sensors will automatically update as conditions change, such as a pallet moving locations or a shipment going out. As a result, they ensure digital inventory management platforms always have the most up-to-date information possible. This enables organizations to avoid miscommunication-related errors like stockouts.
IoT systems can be complex, but they don’t necessarily have to be that way to be effective. Warehouses could use relatively simple location sensors that transmit an asset’s name, description and real-time placement within the facility. Even though these technically only report data on asset locations, this information also reveals how many are in each area, informing better inventory decisions.
3. Consolidate Inventory Management into a Single Solution
Multi-location inventory management must also prioritize consolidation. Using digital alternatives to manual processes is an important step, but utilizing multiple tools still leaves room for miscommunication and error.
The average organization uses 130 software-as-a-service apps, which can quickly lead to inefficiencies. Switching between multiple pages and platforms takes time and makes it difficult to see the big picture accurately. Supply chain organizations can get around this by using an inventory management solution supporting several locations and workflows.
A consolidated solution will let anyone with access check online and see up-to-date information from all connected storage locations. Having a single source of truth for all this data ensures everyone knows what’s happening, and decision-makers don’t need to switch between multiple pages or apps to monitor inventories across different sites.
4. Play to Each Location’s Strengths
It’s also important to recognize that maintaining good records across sites is only part of managing multiple locations effectively. Businesses must also consider how they use each storage facility.
Every location likely has unique advantages and challenges. Companies that store the same amount of each part or product in each facility aren’t accounting for those obstacles or capitalizing on the opportunities, leading to inefficiencies. Optimizing multi-location inventories means adjusting storage strategies to make the most of each site.
Warehouse rents in rural areas may fall below the national average of $7.29 per square foot but be farther away from consumers. Consequently, storing high-volume, low-volatile inventory in these spaces while prioritizing more seasonal products in smaller but nearer-to-consumers urban facilities may yield better results than keeping things constant everywhere.
5. Optimize Individual Warehouse Layouts
Similarly, effective multi-location inventory management also makes the most of individual warehouse layouts. If any one facility isn’t running at peak efficiency, it will hamper the rest of the supply chain, so granular improvements can go a long way.
Consider what kinds of products, volumes and workflows each facility deals with. This context is important, as different warehouses may benefit from various layouts. Just as each location’s inventory should reflect its unique strengths and weaknesses, so should the way it stores and moves things.
IoT technology is once again beneficial here. Data from IoT sensors can reveal how items move throughout the warehouse, uncovering any bottlenecks or other inefficiencies. Creating digital twins based on this information to simulate how various changes might improve warehouse efficiency will also help.
6. Plan for Resiliency
Even after implementing these strategies, businesses must recognize that multi-location inventory is inherently harder to manage than smaller, more consolidated operations. It’s best to err on the side of resilience rather than pure efficiency.
The most important step in this strategy is to increase safety stocks. Minimizing inventory levels at each location may lower operating costs but also make supply chains more prone to disruption. That’s too large a risk to justify, considering how multi-location operations are already more likely to experience errors.
Inventory distortion costs businesses $1.9 trillion globally, making it far more expensive than the expense of keeping safety stocks. Organizing multi-location inventories to have these backup surpluses instead of making them as lean as possible will profit companies in the long run, especially amid growing supply chain disruption.
Multi-Location Inventory Management Requires Special Attention
Managing inventories across multiple locations is challenging but possible. Organizations that apply these six strategies can ensure their multi-location operations work efficiently and with minimal errors. As a result, their larger supply chains will enjoy increased resiliency and fewer disruptions.
The keys to multi-location inventory management are similar to those of a single facility but with increased urgency. Transparency, digitization and adaptability are beneficial to any workflow but essential for those distributing their stock across multiple facilities.