Just in Case Inventory Management and the role of WMS

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Just in Case Inventory Management and the role of WMS

28 June 2021

  • just in case warehouseing


We all know the story of Toyota and how they pioneered the concept of Just In Time manufacturing. Rather than stockpiling inventory, car parts are delivered to the production line only as they are required. Given how much money can be tied up in stock, this approach to process fine tuning has revolutionised cashflow management and efficiency. Consider the example of a machinery manufacturer stocking four weeks worth of production inventory in their factory warehouses, valued at £100 million. By reducing the inventory carried from four to three weeks, they can reduce their annual inventory carrying costs by a third. Over 3 years, this can save the equivalent of a whole year’s inventory costs.

Today almost every manufacturing business operates according to Just in Time, allowing them to be agile, able to adapt to changing market demands and to cut their costs. It has also benefited retailers who can dedicate more floor space to creating a customer experience rather than having to stock excess items instead. Just in Time was the de facto standard, but the arrival of the Covid-19 pandemic has challenged this thinking. Many manufacturers had pared down inventory so much, it left them vulnerable to disruption when the first lockdowns hit. This was especially true of those manufacturers who were overly reliant on one supply source, China. The issue then continued to magnify as it spread around the world and the long shipping lead times involved further exacerbated the supply problems.

This sudden failure of Just in Time has resulted in shortages of a vast range of goods, from electronic components to construction materials, garden furniture and clothing. Nike, Ikea, Intel and Apple, are all companies that have suffered as a result of Covid on their finely tuned, Just in Time processes. It was also a factor behind the initial shortages of PPE early on in the Covid pandemic, which left frontline medical workers without adequate gear and governments scrambling to procure safety equipment at exorbitant prices.

These shortages raised questions about whether some companies had embraced the concept of a Just in Time supply chain too aggressively, leaving them extremely exposed to risks and too reliant on a single source of supply. Will some companies now change the way they operate? Will they start to stockpile more inventory and broaden their relationships with suppliers to limit the risks of disruption? How can warehouse operations be adapted to become less reliant on Just in Time and operate according to more of a ‘Just in Case’ model, carrying greater inventory levels without reducing efficiency? One of the answers could be found with best of breed Warehouse Management Systems (WMS) software.

Here are 5 ways a WMS can help manage spiralling costs if you need to migrate from Just in Time to a ‘Just in Case’ inventory policy.

Automated putaway management and location assignments

This is invaluable for warehouses with excess inventory. An effective put-away process is an important stock management strategy to maximise space utilisation and ensure the physical movement of products can be kept to a minimum. There are multiple ways a WMS can automate putaway, by identifying the best place to store items based on available spaces, monitoring how frequently the items will be picked and where they should be placed in the warehouse and by alerting operatives to whether items need special storage considerations.

The different putaway options available within a WMS can be flexible and suggested on an adhoc basis or structured around a set of rules. For instance, they could be set to raise an alert if the incoming stocks need special handling instructions, e.g. allergens must be stored well away from any contaminants in a food warehouse.

Pick route optimisation and planning

As travelling can take up a large part of the time spent on warehouse picking processes, appropriate sequencing of picking tasks within an order is crucial to achieving high efficiency, especially when the warehouse is holding excess stock. After evaluating the day’s production order pool and assigning assembly line picking tasks, a WMS automatically evaluates the routes available and will direct operatives to fulfil pick instructions using the most efficient travel path for their immediate location. Goods are picked more quickly, potentially using fewer resources.

Shelf life management and stock rotation

There is huge value in using a WMS to optimise stock rotation and ensure that items with a limited shelf life are carefully managed to avoid any wastage. This extends beyond the obvious perishable raw materials to also include packaging items, which can in turn also impair finished product quality if they are past their recommended use by date. A WMS makes this easy by automatically reminding operatives of which lots to pick first, based on first in first out principles. If the warehouse is carrying more stock this will be fundamental to maintaining efficiency levels.

Perpetual inventory (PI) stock counting

By introducing a daily PI or cyclical counting process supported by a WMS, warehouse managers can eliminate the need to undertake stock counts on a monthly or yearly basis. Cyclical counting is the most effective way to maintain inventory. It also means its business as usual whilst counting is in progress and any inventory shrinkage can be minimised. All materials movements are accurately recorded with an electronic audit trail and discrepancies are immediately apparent.

Traceability management

When product quality issues are raised, it is vital that all affected products can be quickly and accurately identified to minimise potential losses - both financially and to brand reputation. Using a WMS, it is possible to create reports detailing lot / batch / expiry date information which confirms to compliance requirements and also allows for detailed trend analysis. At any point in time, a WMS will provide a full trail of what has happened to every element of stock during its entire lifecycle, providing extensive traceability management options. The audit trail covers the entire supply chain, right down to the source and provenance of the original raw ingredients at the SKU, UPC and lot level, limiting the impact of inventory wastage.

As businesses emerge stronger from the Covid-19 pandemic, we have all learned the importance of being agile and working in a ‘new normal’ environment. Holding increased inventory levels for ‘Just in Case’ purposes is one of the valuable lessons many manufacturers will have learned and with the right warehouse technology in place, profitability will not be compromised.

Remember that in whatever we call ‘normal’ times Just in time works, however as we have seen ‘JIT’ became Just Too Late for many businesses still feeling this lack of bandwidth twelve months later.