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Managing Space Scarcity in Inventory Management

Nov 14, 2014 2 min

Many retail and wholesale businesses experience pressures with their warehouse space – at least temporarily before the biggest demand peaks. The space challenges are often most apparent in areas where there are special warehousing needs – such as for chilled or frozen goods – or with highly seasonal high volume products like bicycles or barbecues.

Living with the space restrictions often causes significant extra work in inventory management and increases the workload of stock replenishment personnel. We have found the best solution is to integrate warehouse capacity into the inventory management process. Our customers do this by providing the stock management software with the information on warehouse capacity by product area (e.g. chilled, frozen…) and product volume and pallet size information (which is, anyhow, often maintained for building optimal orders). This information is used to calculate a future stock capacity forecast.

The forecast is based on product-level delivery plans calculated from current demand forecasts and set replenishment targets and restrictions. The product-level stock forecast is aggregated then to product-group-level stock capacity requirement via the volume information of the products’. Then potential capacity challenges can be automatically monitored by the software and, if likely challenges are identified, automatic exception alerts or order plan adjustments can be made. The process has greatly simplified our customers’ lives when it comes to the restrictions of warehouse capacity.

stock-capacity-requirement-forecast

Figure 1. An example of the stock capacity requirement forecast. 

Written by

Mikko Kärkkäinen

Mikko Kärkkäinen

Co-founder & Group Chief Executive Officer