Accounting Best Practices, Fifth Edition

16–13. Optimize Inventory Storage through Periodic Location Changes

Though inventory may initially be organized to reduce the travel time of order pickers, this may change over time as different items become more or less popular. This is a particular problem for items whose sales change dramatically on a seasonal basis, or in proportion to their presence in certain catalogs or short-term sales promotions. In such cases, the picking staff may suddenly find itself traveling much farther to pick items than was the case just the day before.

A labor-intensive solution is to periodically review and revise inventory storage locations based on estimated demand patterns. This is not difficult for seasonal goods, since it is evident which items will soon experience changed levels of demand. Likewise, the imminent release of a new catalog should trigger inventory locational changes based on the contents of the catalog. On a very short-term basis, automated storage and retrieval systems can be assigned the task of completely shifting inventory overnight, so it is properly reconfigured to minimize its travel time the next day.

An advanced warehouse management system can perform this inventory review chore periodically, and can also recommend new inventory locations whenever the warehouse itself is reconfigured with new or revised storage locations. However, warehouse management systems offering this feature are extremely expensive. An alternative is to periodically bring in a consultant who ...