Inventory positioning refers to the physical location inventory occupies within the warehouse and the wider supply chain. Part of any supply chain or warehouse manager’s role is to ensure that inventory is positioned in the optimal location in order to ensure efficient movement of goods, the safety of stock and personnel, as well as quick, reliable fulfillment.
In this article, we’ll take a look at why managing your inventory position is important, how to position your inventory effectively in the warehouse, and some widely used inventory positioning strategies.
Inventory positioning explained
Good inventory positioning is significantly more complicated than what initially meets the eye. Businesses need to plan the layout of their warehouse carefully, with early consideration of where different types of SKUs will be stored, when they’ll be moved, and how they’ll be moved.
This helps to make sure that goods can move through each stage of the fulfillment process as quickly as possible while mitigating the risk of items getting damaged, lost, or shipped to the wrong place.
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Similarly, inventory positioning also incorporates the type of storage that SKUs are stored in or on, whether that be racking, bins, picking towers, pallets, shelves, fridges, or high-value cages. Good inventory positioning management ensures that the right SKU is stored in the right place.
Inventory positioning also refers to the position of inventory in the wider supply chain, particularly in relation to the physical location of the goods and how that improves or supports supply chain efficiency, outbound and inbound logistics, and the fulfillment process.
Why inventory positioning is important
For the vast majority of businesses, optimized inventory positioning means more money. If companies can fulfill orders quickly and accurately, customers will be happier and operational costs will be lower. Let’s break this down in more detail.
Your workforce needs to be able to access inventory safely and, in most cases, quickly. It should be easy to find, with the location clearly marked on a warehouse management system.
If access to inventory is poor or unclear, the fulfillment process can be significantly hindered as your pickers will struggle to collect orders in good time.
When we talk about inventory flow, we refer to the speed and ease at which inventory moves through the warehouse.
Flow can be interrupted by all sorts of things, whether that’s wrong items being sent to the warehouse, issues with technology or communication, or poor inventory positioning.
Speed is everything when it comes to fulfillment. With same-day and next-day delivery being almost essential to offer in some industries, having an organized warehouse is a must. Poor inventory positioning makes it difficult to meet next-day or same-day timescales consistently.
If inventory isn’t positioned well, goods are going to go missing, orders are going to get shipped incorrectly, returns are going to happen, and customers are going to be increasingly unhappy. All of this costs time and money, and then there’s what can’t be fixed — your reputation.
Similarly, if stock is continuously getting lost or moving slowly through the warehouse, you’re going to end up paying for more storage costs.
How to optimize inventory position in the warehouse and wider supply chain
Now that we’ve taken a closer look at why inventory positioning is so important, let’s consider some steps we can take to improve inventory positioning and some industry best practices.
Warehouse layout optimization is an essential component of inventory positioning. Before inventory ever even enters the warehouse, consideration should be given to how the inventory will flow through the warehouse, where inventory will be stored, and where it will be processed, packed, shipped, and so on.
It’s important to have defined areas on the warehouse floor that are dedicated to individual operations within the overall warehousing process, such as packing, quality control, and storage. How each of these areas lies in proximity to each other is key to optimizing the overall inventory positioning strategy.
Capacity planning is also important for inventory positioning. The needs to be enough room in the facility to account for future growth, as well as to have the flexibility to reposition inventory if required.
Position inventory based on volume
It makes little sense to have your most popular products at the furthest away corner of your warehouse. You’ll want to ensure that products that sell well are located closest to your packing area so that pickers can access them easily.
If products are extremely popular, you may want to consider keeping some in bins (if appropriate) right by the packing area, so they can be fulfilled as quickly as possible.
The same principle applies to the wider supply chain, too. You should position your inventories close to popular markets. For example, if a particular SKU sells best in the EU, it makes little sense to keep the bulk of your stock in the UK. Working with 3PLs that have an international network of fulfillment centres can help you to achieve this.
Consider weights, dimensions, and movability of inventory
It goes without saying, but you’ll want to keep heavier items close to your packing area, whether that’s on pallets, on the lowest floor of the picking tower, or on the lowest shelves.
It’s not just important to health and safety – it also means you don’t have to worry about transporting heavy SKUs far.
Use an inventory management system
Having a forensic understanding of your inventory both in and out of the warehouse will massively improve your ability to understand inventory positioning properly. One way you can achieve this is by using an inventory management system to keep track of where inventory is, what’s selling, what’s struggling, and which markets are most profitable.
By fully harnessing the power of a sophisticated inventory management system, you can ensure optimal stock is being held at all times, reduce last-mile delivery costs and delivery times via smart allocation, raise new orders at the right times, and run sales and discounts when they’ll have the most impact.
Outsource your fulfillment to a 3PL
3PLs like James and James Fulfillment have facilities that have been designed around optimal inventory positioning. Built from the ground up with the fulfillment of lightweight, fast-moving products in mind, our international network of fulfillment centres allows us to process inventory and orders super-quickly.
With 97% of orders shipped same-day and 99.9% of orders accurately picked and packed, we’re the number one 3PL for brands looking to Scale Up their business fast.
In addition to our fulfillment service, we also have an award-winning, custom-built inventory management system, ControlPort. Our software – available to all clients – gives you a detailed breakdown of inventory costs, sales, BBE dates and more, all in real-time, allowing you to make informed decisions about your inventory and do what needs to be done to ensure your business grows.
Let us worry about inventory positioning and order fulfillment, while you get on with the important stuff. For more information, get in touch with our fulfillment experts to discuss a bespoke solution.