Gerry McHugh Consulting - Business Blog

Warehousing, Control and Accuracy

Posted by McHugh Consulting

Jul 2, 2014 4:48:13 PM

 Here at McHugh Consulting we are committed to provide our Customers with Best Practice methods of controlling their business be it small or large. All too often companies/staff complicate simple tasks thereby wasting time and money. Our methodology in Consulting is to simlify, where possible, functions in a Business through methods our Consultants have tried and tested for many years and have reaped the rewards. A warehouse is a typical place to start this process. So let us now look at a warehouse from our Consultants perspective.

A place for everything and everything in its place, is that a good description for an efficient warehouse? In my opinion it is not.

When did you last really look at the layout of your warehouse or are you about to create a new warehouse? Read on and see where you fit in this analysis and do you need a highly skilled Consultant to audit, not your accuracy, your operation of the warehouse.

A warehouse can consist of some or all of the following and maybe even more, racking, smaller shelving, Lin bins and Bulk/Chemical storage. It can be manual, partially or fully automated, plus the safety of fork lift use. But they all have several rules in common, where to put the material and how to find it. Then comes the big issue, Accuracy. One of the many surprises I learned over the years is that people cannot count for a full day, no matter how educated they are. I have proven this to people many times, even Auditors. So now let us analyse a warehouse:

Traditionally companies set up the warehouse, assigned a code for each location and then allocated the name/part number to the location, quite simple. Until you come to the time that there is no room left for what is supposed to go there as you had just received more than it can hold. So now you create a bottleneck for material coming from goods inwards, or worse still add more storage space. But what I seen in many companies was empty space somewhere else in the warehouse. " Ah, but that space is allocated to another Item that has not come in yet" So what to do now! It is quite simple to resolve this and that is by Not allocating Items to specific locations, just register them in whatever space is available on arrival, then when a location becomes empty you remove the item that had been allocated there when you had stock. You then have a flexible yet simple warehouse, which if you are implementing for the first time you will find serious opposition to change. Why the opposition, well in old companies only the warehouse staff know how to run a warehouse and not some outside consultant that does not even know how to build their products, how could they know? We come back to simplicity again and believe me you will be astounded at how efficient and indeed accurate a properly layed out warehouse with clearly identified procedures will do for you. Are you paying overtime rates unnecessisarily.


I alluded to accuracy earlier, obviously this is vital and for many reasons, continuity of production or process, sales as in I know what I have and where it is, the money in the warehouse could be in the bank. So what is the best way to maintain accuracy? Probably eliminate the human element which is usually not possible. I also said people cannot count and it is true. I did some Lecturing to people, from various companies, who were studying materials management and was not surprised to see that this was a common problem. Typically companies have an External Annual Audit by Financial Auditors. Part of this was an inventory count and if the number of different items was large you then needed help, so you pull people from all sections of the company and get them to count. What you can absolutely be sure of is that your warehouse accuracy will be Worse after the count than it was before. But if the value of the actual count is similar to your book value then it may be accepted. One method of eliminating this is what we all know as Cycle Counting, but you must set up a program and get acceptance from the external Auditors that it is good enough to replace the annual count. This Cycle Count should be set out in Procedure and have the ability to prove to the Auditors that you are following it. When you implement this Procedure it is your first real step towards genuine warehouse accuracy. Mchugh Consulting will analyse and help you implement the most suitable Cycle Count System for your company.

Please note that this analysis of Warehousing does Not just apply to manufacturing, it can be where material is held for a large office or even a small retail store.

Topics: Warehousing control


Gerry McHugh

I have 40 years of international business experience that can help shape your business for success.

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