What is the Definition of Inventory Position & How to Improve It

When you choose your products, you’ve already passed the point of no return. You placed an order for them. You received your stock. Now the question is, where should it be placed? Inventory Position is just as essential as order quantity — after all, there’s no sense in having a lot of stuff if you can’t use it when you need it. Ecommerce enterprises can use inventory administration techniques to know where to store their goods so that consumers get orders on time and error-free, as well as enhance warehouse efficiency and fulfillment speed.

What does the term “inventory position” imply?

The position of a company’s inventory, both in terms of its physical location and in the overall supply chain, is known as inventory positioning.

In this case, “inventory position” refers to where and how inventories are held on warehouse racks, as well as what part of the supply chain inventory items are kept (such as shops, warehouses, or production lines).

Optimization of inventory management ensures that order fulfillment SLAs are met while also reducing logistics and inventory expenditures.

Inventory position is a term used in inventory accounting to describe the amount of goods available for sale. Within the framework of inventory accounting, inventory position may also be seen as a measurement of the entire quantity of inventory held by the business. The formula for calculating inventory position is:

Inventory position = (on-order inventory + on-hand inventory) – backorders

Why is inventory location so significant?

How you arrange your products in storage and on the supply chain has a big influence on your operational efficiency, operating costs, and capacity to satisfy clients.

On a warehouse level, having your goods easy to find and reach makes picking easier, resulting in increased fulfillment speed. It also reduces the chance of lost or forgotten items, which lowers waste and lowers inventory holding costs.

Storing inventory in an LCS stage that minimizes lead times allows you to more effectively meet customer demand. You avoid stockouts, which irritate consumers and drive them away, by having your inventory accessible in the areas and channels you need it to be when it’s time to ship items.

Also, placing inventory near popular order destinations minimizes delivery time while lowering shipping expenses.

How to arrange your inventory with inventory position?

Whether you’re organizing your products on a shelf or in fulfillment, understanding how to physically arrange them, the ideal locations, and supply chain stages might be intimidating. Here are some recommendations for putting your goods in warehouses, throughout cities, and along the network.

Ensure that high-volume products are within easy reach

When setting up your warehouse, keep in mind which SKUs have the most turnover. These goods should be kept in simple-to-reach locations for faster replenishment. This saves pickers time and speeds up the order fulfillment process as a whole.

Make sure that high-demand items are available at fulfillment centers that are nearest to popular order pickup locations (like major cities), as this cuts delivery times considerably.

You can keep a popular SKU longer in your supply chain if it is popular. You may order supplies ahead of time and place units as near to consumers as possible to reduce lead time when you correctly predict high demand for a product.

For less well-known items, it’s usually better to postpone placing an order with your supplier until a customer places an order for it (to avoid higher holding fees).

Forecast demand for planning ahead of time for future spikes

Accurate demand forecasting enables ecommerce firms to place the proper quantities of inventory in the appropriate locations and channels so that they may fill all client purchases.

Poor demand forecasting can lead to shortages and backorders, both of which irritate customers. Retroactively re-allocating inventory increases holding and transporting expenses that might have been avoided with better forecasts.

Forecasting demand once is tempting, but ecommerce companies must treat demand forecasting as an iterative, never-ending process.

Seasonal variations and local advances in demand necessitate a shift in inventory position on occasion.

Trackable data and metrics can be found on several 3PLs, such as Launch Fulfillment, to help you improve your inventory prediction. Working with a 3PL like this may help you figure out when and how to adjust your stock levels.

Keep heavy or bulky SKUs off the bottom of your shelves

For obvious reasons, it’s not a good idea to put your heaviest or most immovable products at the top or rear of your warehouse racks.

Instead, keep them as close to the ground as possible to avoid any danger or difficult effort.

At the same time, match slotting for bulky SKUs to the product’s popularity. If they turn over rapidly, make sure they’re accessible. Consider storing smaller, lighter, or more popular items ahead of them if they are rarely purchased.