High turnover inventory systems

Problems Caused by High Inventory Turnover

When a company achieves a high rate of inventory turnover, it may find that the increased turnover places pressure on both its inventory tracking systems and storage facilities. Record keeping is one of the first systems to be impacted by a high turnover inventory system.  It is impossible to manually record transactions in this environment, even with hand-held bar code scanners, because the enormous volume of inventory moves and corresponding pressure on the warehouse staff will yield an unacceptably high error rate. Instead, redesign the record keeping systems with the goal of achieving full automation.

Configuring for High Inventory Turnover

There are three ways to attain this goal. First, reconfigure the warehouse so that all inventory moves pass through choke points where automated bar code scanning equipment records each item or pallet, and shunts aside bad scans for manual entry.  This is the current situation in the majority of high-turnover warehouses.  Second, switch to radio frequency identification tags, which automatically track the locations of items in the warehouse.  This appears to be the direction in which record keeping is going, though "dirty" environments containing an excessive amount of stray signals can impact the accuracy of these systems.  Third, rely on advance shipping notices from suppliers to record the entire amount of inbound deliveries, though this requires a high reliance on the information provided by a third party; in this situation, a supplier should be certified in advance as to its information accuracy.

There is also a specialized record keeping approach only applicable to just-in-time environments, where the company only tracks the unit total of newly produced goods.  It then uses its bill of materials to determine what inventory must have been used to create the finished goods.  However, this method is not workable for pass-through environments where there is no production, nor for situations where there is a significant amount of on-hand raw materials or work-in-process inventory.

The storage facility itself may also present problems in a high turnover environment.  One issue is storage height.  If a company has maximized its storage space under a high (30-40 foot) ceiling, then it is spending too much time using specialized machinery to put and pull items to and from the highest rack spaces.  A better approach is to shift the high-turnover items to lower rack locations where moves can be more rapidly completed, and reserve the upper racks for slow-moving items. 

Also, because the warehouse bottleneck is frequently the dock area, the dock area must be sufficiently large to support the maximum expected volume of staging transactions. 

Finally, the highest-turnover warehouse facilities probably utilize cross-docking, where inbound inventory enters the facility through one door and exits through another without ever being stored.  If the company appears to be heading in this direction, then an entirely new facility may be required that supports a cross-docking configuration.

Thus, achieving high inventory turnover presents a new set of problems - record keeping must be fully automated, while the storage facility may require considerable reconfiguration, if not outright replacement.

Related Courses

Inventory Management