Warehouses, stock rooms, garages, or wherever products are stored, are best managed when it’s easy to find and store those products. The easiest way to do that is to zone it out based on areas and locations.
What are Areas and Locations?
Simply put, areas are a collection of locations and locations are where the actual inventory is stored. Different words can be used in different warehouse systems but these are the two fundamental strategies used.
Areas will contain a collection of locations that are all similar to one another. This can be defined based on proximity to one another, or the type of location product is stored, regardless of proximity. For example, you can create an area that contains all locations that are bins. These bins may be scattered throughout the building. Another example is having an area contain bins, racks, and shelves that are in a cold storage, such as a refrigeration room. It all depends on the needs of the business.
Areas can define how those locations can operate. For example, you may only want to put inventory that can ship out into one area. You may have a second area where you can store product but it cannot ship out yet. All locations in those areas would follow those rules.
Locations are what inform you of where your product is. You may have several bins storing small items and each bin is labeled as its own location. With the proper set up, you’d know that the item you’re looking for is in bin X vs bin Y. Further, by keeping your products in well defined locations, you’ll also know the total count of products in inventory. This will help determine when to restock low inventory more efficiently.
Is it Worth the Time to Set This All Up?
When you start your business and have your initial stock of products, it’s likely a small amount that you can keep track of. Setting up defined spaces to store products might seem like unnecessary overhead that wastes time. After all, if you have to go through the effort to pick from the one location you have in storage, is there any benefit to doing so?
The answer is yes.
The saying “Practice Makes Perfect” is not quite true. The real quote is “Practice Makes Permanent.” If you start out small and do not practice the fundamentals of inventory management, you will soon be overwhelmed once inventory levels pick up. To add to that, if there is more than one person managing inventory, it will be even more difficult.
Misconceptions
There are some common misconceptions when it comes to area and location management. One is that all locations need to be the same size. That is simply not true. You can define them the size that you need for what will be stored. If you need to stock screws and bolts, you may want to define each bin as a location. However, the locations where the product they are used in, such as a bicycle, can be much larger.
Another misconception is that the more locations you can define, the better. This is also not true. While you should work on making locations granular, they should not be too granular. The reason is every time you move inventory, you will need to record that it was moved if it changes locations. This may be tedious if locations are defined in too small of zones.
Start with sizes that you can manage. For example, you may have two storage rooms, A and B. If all you can start out with is defining each room as a location, that is significantly better than having no locations. You will have cut down searching by half!
Another misconception is that you will lose storage space by defining locations. If you need to “shove” more product in and it happens to overlap two defined locations, then the system would reject it. This is also simply not true. The answer comes down to how granular to define locations. One location can be an entire room whereas one can be sectioned off in 10’x10′ squares.
Location sizes also don’t have to be static. So if you find out that the defined sizes you have aren’t working for how much product is stored, that is ok! Again, any amount that you can section off is better than none!
Try the SKU Hunter game created to show how well defined locations work to your advantage!