Having a multiple warehouse inventory management system in place can simplify the operations of a growing business. It maximizes the storage capabilities of a warehouse while ensuring a smooth supply chain that enhances customer satisfaction.

Since the e-commerce market boom in 2020, the warehousing and storage industry has been on a steady rise and continues to see unparalleled growth. From a valuation of $783.92 billion in 2024, the industry is predicted to grow to $1062.19 billion by 2028.

One of the major trends you will be seeing during the forecast period is the adoption of warehouse inventory management systems. If you’re experiencing or anticipating a growth in demand, you’ll want to look at multiple warehouse inventory management solutions at some point. We suggest you start early to begin reaping the benefits and get a headstart.

Keep reading to learn efficient strategies to manage inventory in multiple warehouses and how to measure their effectiveness.

Multiple Warehouse Inventory Management Strategies

There are some key strategies that you should get right when you’re implementing multiple warehouse inventory management for the first time. These include:
 

1. Using a Multi-Warehouse Inventory Management Software

A multiple warehouse inventory management software enables businesses to track inventory across all their warehouses in real time. These software solutions offer users a host of features and automation to support the large requirements of many warehouses.

They allow you to control every aspect of your warehouse inventory management from demand forecasting and inventory tracking to replenishment and analytics. Apart from the control over operations, these solutions also help you bring more accuracy, transparency, and efficiency into your overall inventory management processes. 
 

2. Strategically Planning Warehouse Locations

When managing multiple warehouses, it’s necessary to choose your locations carefully. Your goal is to improve delivery speed and accuracy while bringing down operational expenses.

Focus on incorporating locations that reduce the distance between your warehouses and customers, vendors, suppliers, and other parties you’re working with. Make sure to consider the cost and availability of factors like transportation, labor, utilities, etc. when deciding on a location. Consider real estate prices and tax implications too.
 

3. Optimizing Layout and Organization

The layout and organization of your warehouse impact every aspect of your inventory’s performance. Optimize it by creating a layout that facilitates the smooth flow of staff and equipment while considering product placement. You also want to look at your warehouse equipment list and optimize the placement of equipment based on usage.

Make sure your inventory is close to relevant workstations and that items used together are placed nearby. Try to put fast-moving inventory items where they can be accessed easily. Consider using itemized workstations and detailed maps to help employees grasp the layout quickly. Work out the best storage solutions for every product by considering their weight, fragility, size, demand, etc.

Having a good understanding of slotting techniques, lean principles, and vertical storage solutions can help you design a much better layout.

When it comes to organization, look at incorporating labeling and signage to locate, categorize, and store items faster and more efficiently. Use barcodes and RFID tags where appropriate.
 

4. Prioritize and Optimize Inventory Distribution

Understand how to prioritize inventory allocation and distribution efforts for optimum profits, reduced shipping costs, and improved order fulfillment times. This requires you to look at your historical data as well as demand forecasts.

Once you have a good grasp of the values of different items in your inventory, the next step is classifying them based on value.

The ABC classification is a good strategy to use here. Start by classifying items into different categories to make it easier to prioritize inventory allocation according to your available warehouses. Category A is where you want to put your most profitable items to ensure your inventory is always stocked with them first. These goods should be closely monitored and controlled. Their replenishment cycles should also be more frequent.

Meanwhile, Category B includes items that sit slightly lower on the profitability scale and so on.

Knowing which inventory items to prioritize can help tremendously when you’re debating resource allocation, supplier collaboration, and other similar decisions.
 

5. Setting Standards for Processes

Outlining standardized processes for all your warehouses can make management a breeze for you and your teams. From maintaining quality and quantity to outlining workflow, standard processes keep everyone on the same page.

Your employees know which process to follow for each task, reducing confusion and redundancy. You can supervise any aspect of the workflow without constantly conducting briefings.

You can also design and tweak these processes to ensure that every item receives the right care and attention. In addition, standardized processes allow you to find problematic areas faster should there be inefficiencies in your operations.
 

6. Keeping Accurate and Up-To-Date Records

Before you implement other multiple warehouse inventory management strategies, ensure you’ve implemented this one.

By keeping your records accurate and up-to-date, you’re ensuring the easy transfer of data and communication between warehouses. This is very important for decision-making processes and inventory-related activities like timely ordering and replenishment, demand forecasting, inventory liquidation, securing supplier deals, running promotions, etc.

Cloud-based inventory management solutions are the most popular when undertaking this strategy. Not only do they allow you to access data from all your warehouses from a centralized dashboard, but they also ensure there’s no lag in updates. Even better, you can access all your data from anywhere and using any device.

However, inventory management software is only part of the strategy. You also need to add processes like conducting a complete inventory count at least once a year to ensure accuracy.

Measuring the Effectiveness of Multiple Warehouse Inventory Management Strategies

After you’ve designed and implemented multiple warehouse inventory management strategies, the next step is to measure their effectiveness. To accomplish this, you need key performance indicators (KPIs).

KPIs allow you to track the performance and progress of a variety of variables. Regularly monitoring KPIs can help you optimize your inventory management practices and improve overall efficiency. It can also help you identify red and yellow flags that need to be dealt with promptly to ensure continuous operations in an ever-changing market.

Here are some of the most common KPIs used to measure and track the performance of warehouse inventory as well as the indicators that will tell you when something needs to be tweaked.
 

Inventory Turnover Rate

The inventory turnover rate allows you to measure how quickly your inventory is being sold and replenished within a certain timeframe. If you have high inventory turnover rates, they’re a good indicator of strong sales activities and efficient inventory management. In contrast, low inventory turnover indicates poor sales.

You can calculate your inventory turnover rate using this formula:

Inventory turnover rate = Cost of goods sold / Average inventory value

If your inventory turnover is low, it may be time to take a closer look at your demand forecasting practices. You can also use the formula for identifying slow-moving goods or the amount of dead inventory.
 

Inventory-to-Sales Ratio

The inventory-to-sales ratio can help you identify the amount of your leftover inventory and sales once the month ends. The ratio can be used to determine when rising inventory levels coincide with falling sales to prevent cash flow issues. The ratio is also useful in determining how much stock needs to be purchased to prevent backorders while keeping operations running.

You can calculate your inventory-to-sales ratio using this formula:

Inventory to sales ratio = Average inventory value / Net sales
 

Carrying Cost of Inventory

Inventory carrying costs tell you the expenses that are tied up in the purchasing, storing, and holding of your inventory. Carrying costs of inventory can be used in a variety of deductions and decisions. It enables you to determine how long you can hold inventory before your business starts incurring losses.

Once your carrying costs become too impractical for your budget, it’s time to consider alternate solutions for slow-moving and dead inventory.

You can calculate carrying cost by using the formula:

Inventory carrying cost = Inventory holding costs / Total inventory value  100

The inventory holding cost includes expenses such as employees’ salaries, warehousing, insurance, depreciation, obsolescence, etc.
 

Inventory Accuracy

Inventory accuracy helps you identify discrepancies between your physical inventory and the inventory levels in your records. It’s quite important to ensure that your records, which are used to make multiple inventory decisions, are accurate.

Calculating inventory accuracy can help you identify and tackle discrepancies before they begin affecting your operations. The more accurate your inventory, the better your inventory practices and vice versa. Inaccurate inventory levels can hint at discrepancies such as product damage, theft, miscalculation, supplier-side shortage, etc.

You can calculate the accuracy of your inventory levels by using the following formula:

Inventory accuracy = Counted stocks / No. of stocks on record  100

Inventories with perfect matches in counted stocks and recorded stocks will have a lower inventory accuracy rate. While those with more discrepancies will have a higher number.
 

Shrinkage

Shrinkage allows you to get a clear picture of the difference between your recorded inventory and your physical inventory. Shrinkage allows you to calculate the cost of the missing/lost/damaged inventory.

If you’ve found discrepancies in your inventory accuracy, calculating shrinkage is the next step in the process.

You can deduce shrinkage by using the following formula:

Shrinkage = (Cost of recorded inventory – cost of physical inventory) / Cost of recorded inventory
 

Order Cycle Time

Order cycle time measures the time it takes for your company to fulfill a single order. It refers to the window between order placement and delivery.

The order cycle time reflects how efficient your order processing, storage, picking, packing, shipping, and delivery processes are. A shorter order cycle time is an indicator of a fast turnaround. A fast turnaround is a positive sign because it allows businesses to increase customer satisfaction and thereby increase sales. If you’re trying to gain a competitive edge in the market, aim for faster turnaround times.

Here’s the formula for calculating your order cycle time:

Order cycle time = (Delivery date – order date) / Total orders shipped
 

Stock-Outs

Measuring your stockouts can help you discover the percentage of products that were out of stock when customers requested them. A high stock-out percentage is a red flag that indicates poor inventory management and can be a result of machine breakdowns, underestimated demand, inefficient replenishment, etc.

You can measure yours using the formula:

Stock-outs = Frequency of stock outs / Monthly or annual sales volume
 

Inactive Stock

Measuring inactive stock tells you how much inventory remains unused in your warehouse for a certain period. Having a high percentage of inactive stock is a red flag because it means that capital is locked into slow-moving or dead inventory.

Ideally, you want to minimize inactive stock as much as possible while reducing the expenses and allocation of resources for such inventory.

Here’s the formula to calculate your inactive stock:

Inactive stock = [(Inactive inventory stock value – critical spares stock value) / (Total inventory stock value – critical spares stock value)] x 100

In this equation, critical spares refer to high-value equipment with long lead times
 

Lost Sales

Lost sales refer to the number of customers you lost because you didn’t have a product in stock. It allows you to learn how much a stock out for a certain product is costing your business. You can also use this number to decide how to prioritize products based on their value.

The formula for calculating lost sales is:

Lost sales quantity = average daily demand  no. of days out of stock

Manage Multiple Warehouse Inventories With Nest Egg

Successful multiple warehouse inventory management comes down to the careful planning of an efficient strategy. It should prioritize successful implementation, close attention to KPIs, and timely adjustments.

Make managing different warehouse inventories easier with Nest Egg. Our innovative stock management tool offers fast information lookups, simple and flexible inventory classification, scalability, an intuitive interface, and multi-device access. Nest Egg supports inventories of different sizes whether you have a few hundred items or tens of thousands. You can have as many warehouses as you need and streamline operations with one tool.

Learn more about inventory management software or call us at (510) 270 5798 for inquiries.