Amazon’s efficient method of warehouse management is the envy of the business world. Amazon has replaced the old shopping experience with an entirely new one that is based online yet still manages to deliver products to customers in a timely manner so that it almost feels like instant gratification, especially with same-day and next-day shipping. There are five things that enable Amazon to be on top in terms of order fulfillment and warehouse management, and there’s no reason why you can’t use them in your own business. We’ll cover all of them below.
Warehouse management software is the key ingredient that makes Amazon’s warehouse system work. With it, each of their locations is able to store inventory data, such as item names, descriptions, quantities, vendors, and placement within the warehouse.
Can you imagine trying to keep track of millions of items around the globe as thousands of purchase orders go out and sales orders come in? The only way to do this is to use warehouse management software to handle a lot of the heavy lifting. We will get into more of the finer details as we go on; just keep in mind that the following features and tools are in the service of a solid software system.
A stock-keeping unit or SKU is made up of a combination of numbers and letters that are used in conjunction with a barcode to identify a specific type of part or product from all other parts and products in a company’s inventory. Think of it as a reference number. You can type it in or scan an item’s barcode to bring up a great deal of information about it. The warehouse management software associates the SKU and barcode with a particular item, and it will display the item’s name, description, size, weight, vendor, location(s), and much more when told to do so.
As you can imagine, Amazon works with millions of SKUs and its employees frequently make use of barcode scanners to scan items in and out. Using a barcode scanner increases accuracy by avoiding manual data entry, and it also automatically updates a company’s inventory records in real time.
There is an opportunity to save time in the way warehouse workers go out and pick items off the shelves to fulfill sales orders. Amazon has the picking process down to a science. Instead of picking items one at a time for each individual order, they often pick multiple orders together. This is called batch picking.
If you receive two orders close together that have the same item in each of them, a worker can simply collect enough of that item to fulfill both orders instead of getting some in one pass and then returning to it in the next. Your warehouse management software can also set up picking routes for your employees that will save time because they are the shortest path to all of the items that need to be picked.
Amazon has always strategically selected the cities and states for its distribution centers. In the early days, Amazon didn’t want them to be too far away from their customers, but they also didn’t want to put them in states that had a sales tax because they could avoid having to charge their customers sales tax on their purchases as long as their base of operations was outside the state. The Internet was like the Wild West in the ‘90s and early 2000s, so there were few laws governing online sales. Increasingly, Amazon has been forced to collect taxes on purchases made through their website, but that hasn’t stopped them from making smart decisions about their distribution center locations.
You can follow their example and make sure any new locations you move into are chosen because they are in the ideal spot for you. You need to take into account a building’s proximity to vendors, customers, and other people and groups who are essential to the success of your operation. Find the right balance, just as Amazon does with its more than 100 warehouses.
You don’t ship tens of thousands of products a day using manual means alone. In addition to its huge workforce, Amazon employs an army of more than 100,000 machines to dramatically speed up its warehouse management. Since 2014, Amazon has been using small robots to transport items in the warehouse and quickly pick, pack, and ship the right products. These are remarkable tools that have cut the time needed to fulfill orders to a fraction of what it used to be while also reducing accidents and mistakes. Machines can work around the clock with a relatively small number of workers on hand to keep them working properly and perform functions that robots can’t.
Adding robots to the warehouse mix may be out of the question for most businesses, but you can still add automation to your warehouse management by setting up automatic reorder points on your items, assigning default vendors to them, and integrating your warehouse management software with your accounting software and other business solutions to sync them all up. There are many other things you can do to automate key processes in the warehouse. And many of them are made possible by the right warehouse software.
Amazon rose to its current position because they dared to innovate not only by selling online at a time when retail stores ruled, but also by managing their inventory in new, smart ways. You can follow their example and improve your efficiency with a warehouse management solution like Fishbowl Warehouse. It’s the #1 inventory management solution for QuickBooks.
Amazon has had great success by being smart about the way it manages inventory in its warehouses. Other businesses can follow Amazon’s model by taking these steps: