5 Best Practices in Optimizing the SKU Velocity in Your Warehouse

This post is about the best practices to track the velocity of your SKUs which is important to know as a DC manager and as a director of DC. As a supply chain inventory manager of your supply chain you got to know what are your A SKU’s, what are your B SKU’s, what are your C SKU’s. A SKUs are the fastest moving SKUs and the B SKUs are the moderately moving SKUs and C SKUs are the slow moving SKUs. The last thing you want to know is how to slot your A SKUs, slotting all the way far at the back of the DC will make the operators to walk more. That’s why it’s very important to know your fast moving SKUs like A+ SKUs, which is even faster. There are even more fast moving SKUs that could be a seasonal phenomenon that happens only during the peak holiday season, where someone is ordering a specific SKU like a not very popular toy or a very popular gift item for all their friends and family.

Recently we had a customer that went live, there was a Rachael Ray’s Evoo bottle which was one of the fast moving SKUs.

1. So when you know that this SKUs are fast moving, then you stay on top of it and make sure that the PO’s are in place to get those SKUs to be manufactured so you have that product in the DC all the time. You will never run out of that SKU and the last thing as any retailer or any distributor or as a business you don’t want a dissatisfied customer who came to buy it and they weren’t able to buy it and they went somewhere else because of the bad experience and you lost a customer. That’s why it’s very important to stay on top of these SKUs and it’s very easy to determine from your WMS, as it would automatically track it.
2. The WMS does have the ability to track it or all you have to do is take your sales history and filter SKU quantity. That said it’s very simple spreadsheet and do it, doesn’t mean though you’d be able to see well. There will be SKUs that you sold the most and then the SKUs you sold the least. Now you will be able to know ABC with which you can categorize and then again if you run the same report for a peak season you can figure out easily your A SKUs then there might be some A+ SKUs. Also you there would be some kind of aging report, which tells about what is sitting in your DC from one time they thought it is moving.
3. Have your inventory manager to make sure that the inventory is in sync between the host and between the ERP and between the WMS and within the WMS. The inventory manager must be able come out with different inventory buckets and locate those inventory with accuracy and makes sure that the cyclic counting is done correctly so your inventory count is clearly visible. From an auditing perspective you have to know whatever inventory that you have in your DC needs to be accurately reflected in the books because only then the quarterly financials can be accurate and also the yearly financials can be accurately released.
4. The last thing you want is some SKUs sitting there without selling for a long time and you have to find that, it could be like E,F SKUs so if that’s not at all moving for whatever reason so you have to stay on top of this.
5. The other important thing to keep in mind, once you figure out this A, B, and C you should get your slotting and optimize, that means you shouldn’t want your people working walk a lot of distance for areas just that doesn’t make any sense.

So the A SKU need to be slotted close to the packing station or closer to where you know the shipping process is performed whereas the D and the E could be farther away because you know you don’t want people walking as those SKUs sell less so people are going to walk less distance when this SKUs are slotted far.

But imagine the A SKUs slotted out in there and they’re walking a lot right that’s the last thing you want and have you to know the slotting optimization plan, that we’ll talk about it as a separate topic that’s something to keep in mind. Having a good slotting program in place is important and helps to pay attention to these A, B, and C SKUs. When you know it’s moving fast and you got to make sure that the replenishments are ready for these A SKUs.

It’s moving fast and you know these are the bin locations that are going to run out of inventory pretty fast so the replenishers can keep an eye on those as well with the mindset of “hey I know this Isle is full of A SKUs and I gotta stay on top of this. You could also dedicate a replenisher if you have multiple replenishers, you could have dedicated replenisher for that aisle and get the replenishments proactively done so that it will never run out of inventory for that SKU velocity and for those bin locations.

You can even dedicate a workforce for the A, A+ SKUs when doing the peak period to fulfill that popular gift, a popular toy that became so popular and you could temporarily have the really big location that would be right next to the packing station very close to the hub where the carton is getting packed, you could have that there and so that the people are not walking much distance.

If you have single orders where people are just buying this one item in a lot of quantity you could fulfill those in bulk as well. That’s why it’s important to pay attention to these A, B and C SKUs and it’s important to have your inventory manager stay on top of this at any point of time. You called them and asked them for a report they should be able to tell “hey these are our A SKUs, these are our B SKUs, and these are C SKUs, and then A+ SKUs.

They must also be able to tell “hey I’m doing great, I got replenishments ready in place and I got locations fully replenished so people can pick without waiting, similarly for B and C also and I’m not too worried, I know what I’m tracking”, so this is something to think about in order to optimize your facility throughput and please share your thoughts and let us know your comments below.