Warehouse Management Implementation Approach

OpenERP Warehouse Management - An Implementation Approach

Why use warehouse / Inventory management systems?

Let's first examine what inventory is, and why it's important to any business.

Inventory can be defined as “an itemised list of current assets” and “a list of goods on hand”.

No matter what business you’re in, you most likely have an inventory – items for sale, raw materials, finished product, tools, parts, supplies, etc. Using an inventory system for your stock will efficiently accomplish the following:
  • You’ll know what you have and where it is.
  • You’ll be able to receive, put away, move and ship out (to internal or external users) all the items you have in inventory.
  • You’ll have pertinent, up-to-date reports about stock levels, usage, and reorder times for all the items in inventory.
  • It’s easy to enter data into, and get data out of.
  • It makes cycle-counts easy and efficient.
  • It will export data easily to your accounting or other back-end system.
In today’s competitive environment, having too little of critical material inventory can lead to big problems. Material Resource Planning (MRP) and Just-In-Time (JIT) inventory management principles have revolutionized inventory processes for larger companies. JIT requirements have flowed down to suppliers, and everyone can save money if MRP or JIT is properly implemented throughout the distribution channel.

Smaller companies recognize the trend, with many managers keeping a “Just-In-Case” inventory for safety. Refer to Drum-Buffer-Rope concepts of lean management to see how to smooth out the process allowing you to remove the "just-in-case" stock.  If the inventory systems were adequate, the waste of money to purchase and carry this extra inventory would be saved. Generally speaking, if the current system requires a “safety stock”, chances are that specific item’s stock level and location data isn’t very accurate either. This can lead to over-ordering currently used materials and scrapping inordinate amounts of materials when it becomes obsolete. Inventory software with a barcode tracking scanner can solve these problems as well.

If you’re not reaping all the rewards to using an automated, efficient inventory software system and barcode tracking system, it's time to get started!

How do I get started with openERP Warehouse Management and inventory system?

Many companies get hung up on the selection of inventory software and the project gets stuck from “analysis paralysis”. This is not the case with OpenERP as you can just download and test it on any PC. 

OpenERP is opensource so there are no licence costs or time limitations on the software. Take you time to test. If you like what you see you can just keep using it. 

For larger warehouse implementations you may want to some help to integrate with your existing sales and purchasing software or perhaps use the other integrated OpenERP modules. It's therefore recommended to do this together with an OpenERP partner. This will get you you up an running much faster - bringing you savings quicker.

To get started using OpenERP just load the Sale, Purchasing, Warehouse management modules and also the demo data at the same time. This will be adequate to get you up-and-running. The advantages with OpenERP approach is that :

  1. It allows you test the solution risk free
  2. It allows you highlight any possible gaps - as it's opensource any additional fields or configurations can quickly be added 
  3. It allows you to build a working demonstrator to discuss with your management team
  4. It allows you to prove to your company team that the technology is going to save you time and money in the long run.
  5. The entry point is inexpensive and after the initial inventory gives an almost instant savings.

High-Level Implementation Approach for OpenERP Warehouse house management / Inventory System :

  1. Make a master list of everything that might be in your warehouse or stockroom. This will include the item number, unit of measure and description at a minimum. It may also include the purchase cost, vendor, minimum inventory amount (the amount you must always have on-hand), and other pertinent information associated with the item. 
  2. Put the list on a Microsoft Excel worksheet. If you don’t currently have a master list of materials you should be able to easily get it from your suppliers. This will minimize the time you have to spend putting it together.
  3. Put barcodes on inventory iteyou ms and locations. Most products come from the manufacturer with barcodes attached. Some products also arrive with QR-Codes which is a 3D type of barcode containing much more information about the product. It's important to review these options and prepare a strategy, even for the future. These barcodes have the item number written in text below the barcode. If these barcodes currently exist, then your effort here might be minimal. You do, however, have to make sure that the barcode on the item matches the item number in your master list in step 1 above.
  4. It’s a good idea to get set up to print barcode labels within the facility. Even if all your materials come from your vendors with proper barcodes, you’ll still find that you’ll have to generate location labels and re-label items from time to time.

    There are a variety of methods you can use to print barcodes. A lowest cost alternative may be good enough to get started – a barcode font. Barcode fonts give you an inexpensive and flexible way to print labels quickly with high resolution and a low initial investment.

    The location barcode is important because the goal of the inventory system is to know not only what your have, but to be able to tell accurately where it all is - specifically. You can get creative with the location barcode. Let’s look at an example: 

    Let’s say that you have a warehouse with 2 shipping doors, 6 aisles of shelves, with a storage shelf on each side of the aisle. When you receive inventory to the dock, you might use a location barcode of “DOCK1” or “DOCK2” to indicate that those materials are sitting inside the door. When you go to put them away, you might put them in location “A3-S6-B4”, which represents Aisle 3, Shelf 6, Bin 4. The important thing to understand here is that the location barcode should not only be understood by the inventory system but also that it means something to the employee putting away the stock. This is the sort of information  could be stored in a QR-Barcode and displayed on the screen of the barcode scanner. 

These steps are going to take a little time, but the good news is that this is the hardest part (from the actual work standpoint) of putting together a barcode inventory system. Try to make sure you have enough help, or at least enough time to be thorough about this process. Make sure that everyone’s expectations are realistic about the level of effort required for this step.

Barcode Scanners: There are four main types of scanners. 

  • Cable barcode scanner - These are attached to a PC using USB or serial cables. These are the cheapest and work well if you don't need any mobility.
  • Mobile barcode scanner - These are “batch” scanners. That means that you’ll collect inventory data using the scanner, then come back to a PC and pull it out
  • WLAN Scanner and Cable Scanner . This is where the mobile barcode scanner connects to the OpenERP database on the network using a WiFi connection.
  • Smart Phone Apps - Could be considered as an ad-hoc solution, but probably not a solution for frequent use. 

Mobile barcode scanners  gives you the ability to take inventory data - track goods receipt, put away, move and goods issue. When you’ve collected the data, you come back to a desktop PC and download the data file from the mobile barcode scanner. From there, you can open it in Microsoft Excel, or import it into OpeneRP.

There are now many Android apps on the market that allow a standard smartphone to scan and transmit via WiFi connection. Development of a SSH, VNC, XML-RPC interface to OpenERP would enable real time updates. Many of the more advanced scanners also have the functionality of remote wireless connection. The workflow logic can be programmed into the scanning device or a special module/add-on for OpenERP could be developed. 

Naturally, your choice of scanner will be driven by your goals and your budget. The most important thing is to take your time defining your needs and to complete a thorough evaluation of the demo programs supplied by the manufacturer.

In the project planning it's important to budget adequate time for the project resources to maintenance of product masterdata attributes such as serial numbers, should you intend to go down this route. the effort involved obviously depends on the volume of products you have. The testing and training of such as solution will also be critical

Taking initial barcode inventory

  • Generated an Item Master List in Microsoft Excel to include at least item numbers and descriptions.
  • Put barcodes on existing inventory, making sure that the item numbers on the barcodes from suppliers match those on the Item Master List
  • Put barcodes on all the locations in the warehouse or stockroom.
  • Selected inventory software and a portable barcode scanner.
  • Imported the Item Master List into the OpenERP application you selected in step 4 above.
  • Congratulations. The difficult part is over! There are only 2 steps left:
Complete the initial inventory – Now you have to scan all the items and locations for the materials that you have in inventory. This part is fairly disruptive to the normal operation of the business (that’s why you see businesses closed for inventory), but you can do it effectively if you follow these guidelines:
    • Make sure you have enough staff and scanners. As a rule of thumb, one operator can inventory 30 bin locations per hour if there is only one item in each bin location. If your locations have multiple unique item numbers in them, assume that they can scan 80 unique item numbers per hour. NOTE: These estimates should be conservative, but it’s important to make sure you hit the initial inventory hard and get it done quickly and completely. You’ll want to minimise business interruptions.
    • Have a plan. Do the inventory systematically, from one end of the warehouse to the other. Try to complete entire sections at one time. Mark the locations with a “flag” like a post-it note or a red dot sticker to indicate when the inventory of that bin location is complete. If you don’t think you can shut down the warehouse for the amount of time it will take to complete the inventory, consider pulling the inventory required for your business to run while the inventory is being completed. Put these materials in a special place, and have a manual list of what’s there. That way, your employees can pull from that stock to do their jobs while you’re completing the inventory. At the end, you’ll count the materials left in that area, key in the item numbers and original quantities, then remove the quantities of each that was used while the inventory was taking place.
    • Reconcile the inventory against the accounting balances that you’re showing for the inventory. Most of the time, the difference between the accounting inventory and the actual inventory will be substantial. Planning to do this validation before you go live with your inventory process will give you the opportunity to spot-check any glaring discrepancies between the two.

Go Live with the Barcode Inventory System

OK, the hard part is over.  All that’s left is to make sure your inventory system quantities remain accurate. This is strictly a function of work practices. Work Practices are defined as “ways of structuring things a worker must do, or ways in which something is done”. Although the work practices for your new inventory system are fairly simple, they must be adhered to in order for the data to remain valuable over time. Here are some guidelines:
  • Never add, move or remove anything from inventory without first recording the transaction with either the portable barcode scanner or the desktop software. If you don’t use the system to record all transactions, two things will happen. First, the inventory data you have won’t be accurate for accounting practices. And, because the inventory data is inaccurate, the system won’t give you accurate re-order, usage or quantity reports. This part is critical. Failure to implement work practices where you log all inventory transactions will completely invalidate all your work!
  • Everything must have a readable barcode label. Over time, you will introduce new items into the inventory and eliminate others. Your shelving locations may change or you may add more. The power of the system is the ability to quickly and efficiently log inventory movements. Make sure that all your products have valid barcode labels. Make sure all your location labels are readable.
    NOTE: You can key in the data from a missing or damaged barcode using the keypad on the barcode scanner, but you’ll stand the chance of making more errors using this method. Click here to see data on barcode accuracy versus keyed entry.
  • Designate a responsible person or group. In order for the inventory system to work, you have to make sure that the folks responsible for the inventory have the commitment and authority to make sure that the inventory work practices are followed. This doesn't necessarily mean the times that you do a full inventory, but when you receive, put away, move and pull out items and materials. Remember, the inventory will only be as accurate as the diligence you put into administering it.
  • Audit the inventory system data. Over time, mistakes and omissions will be made in entering the inventory transaction data. Use the “cycle-count” option in your inventory system to spot-check the accuracy of random item quantities. This will let you measure the effectiveness of your work practices.
  • Run and analyze reports often. Obviously, using the re-order report will help you to make sure that you always have the materials you’ll need on-hand. Consider harnessing the full power of your OpenERP solution. Look at item usage over time, and make sure you’re not carrying more inventory of low-use items than you really need. Eliminate inventory that you’ll never use. Analyze the fast-moving items and project your needs for the rest of the year, and use that data for basis of negotiating with your vendors. If you think about it, OpenERP can tell you the story of your inventory. You only have to take the time and ask the questions.
    NOTE: OpenERP has an option to design customized reports. This option gives you the ability to query the database and generate reports on anything having to do with inventory transactions.
  • Be open to worker’s suggestions on making the system more efficient. Since the colleagues logging the inventory transactions are the ones that will make the system accurate (and therefore a success), be open to their suggestions. Most of the time they’ll want to make the work practices more efficient so they can get through their day quicker and with less mindless work. Sometimes they’ll make suggestions that will save your company “money”. Be open to what they’re telling you. Try to be responsive and implement suggestions where ever possible.

That’s it.  If you’re using this info to prepare, good luck. In either case, if you have any questions, just give us a call and we’ll help you any way that we can with your OpenERP project.

OpenERP Configuration Support 

Do you need some on-site or remote support with your Warehouse management configuration?  - Contact info@baconconsult.eu


Further Reading

Business Processes in OpenERP

Configuration of Knowledge Management in OpenERP

Printing Report, Labels, Forms in OpenERP

Example xPython Programming and OpenERP Interfacing

OpenERP Implementation Approach