How to Design an Effective Inventory System

(Image: system image by AGphotographer from

The purpose of any inventory system is to help the employees and managers actually manage the inventory within a warehouse or distribution center. Whether a new system is being designed or an old system updated, it is imperative to remember that the computer system is simply a tool for the use of employees to aid in the management of inventory. The real key to effective inventory management is the processes in place and the adherence to those processes by the employees performing the tasks at hand.

Things You'll Need

  • Information
  • Knowledge of inventory being stored
  • Knowledge of structure
  • Reporting needs of system
  • Any Standard Operating Procedures

Develop sound physical processes and make them easy for employees to follow. Whether the warehouse is storing moth balls or MP3 players, the processes are the same. And the No. 1 and most important rule that must be followed is “write down everything you do and do everything you write down." Without this simple concept in place and being adhered to no software system in the world will be effective.

Create a secure and controlled environment for the inventory to reside in, this will give any system a much better chance to work effectively. The warehouse should have controlled entry and exit points so that any material entering or leaving the warehouse can only travel through certain exit points. Any time material moved in or out of the warehouse ,must be documented, and although the use of radio frequency scanning can help to reduce errors and data entry time it is never a replacement for diligence and documentation on the part of the employees.

Gather as much information as possible about the warehouse, the activities of the warehouse and its main responsibilities. Interview employees, work with employees as they perform their duties and document the formal and the informal process. The informal process are all the things that go on to make things happen which management is not aware of or ignores as only happening once in a while. The informal processes are what will make or break any inventory system if they are not made formal or done away with.

Design the system to be as user freindly as possible. Most inventory systems are way too complicated for the warehouse using them and entering data becomes almost a detriment to the process as well as the data is rarely used or never used. Or the system is so difficult for the operators to use that the employees just give up at trying to use them as a tool to aid in inventory management. The system being designed must be allow for ease of use at all the critical exit and entrance points to the warehouse.

Implement the new system with a plan in place that has been carefully thoughtout and will cause as little interuption to the operation as possible. Include a physical count of all inventory that is going to be managed via the system. The processes for documenting transactions must also be in place before going live so as to ensure that once the system is live the data can be kept accurate and real time.

Tips & Warnings

  • Make sure to document every physical process that happens in the warehouse.
  • No system is a replacement for sound processes and excellent employees.
  • Make sure the system is as user friendly as possible and that transactions can be recorded at all entry and exit points.

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