The concepts of inventory management and storage management can be somewhat confusing for some people to differentiate them, especially for those who do not live directly with logistics on a daily basis. What is the difference between the two concepts, what is each one about and why are they important? These are the questions this post seeks to answer.
First, let's talk about the concept of inventory management. In a nutshell, inventory serves to guard against uncertainties along the supply chain, both on the supply side and on the demand side. Depending on the type of product and the business, building stock can also be justified to take advantage of price opportunities, buying in periods with lower prices and selling in the future at higher prices. Basically, there are five functions of stock, as already written by Beatris Huber in a previous post. We have cycle, security, transit, buffer and speculative stock.
Inventory can also be thought of as an opportunity cost trade-off. On the one hand, if there is excess inventory, we are immobilizing capital that could be invested in something else. On the other hand, if there is a lack of stock, generating a rupture in demand, the margin of the product that would be sold is lost, in addition to other possible losses, such as loss of market share and damage to the company's image.
The role of inventory management is precisely to deal with these uncertainties and trade-offs. Given a certain level of service that the company wants to deliver to its customers, stock parameters and policies, who decide, for example, the quantity and frequency of supply, maximum and minimum stock levels, the safety stock sizing, between others. In a nutshell, when we talk about volume, value, frequency and other parameters, we are talking about inventory management.
The concept of storage, in turn, is more closely linked to the physical structure and handling of products in warehouses. It is the role of storage management, for example, to make decisions about the storage, positioning, conservation and security of products, as well as to carry out the separation and dispatch of products according to customer orders. It can be said that the objective of storage is to operationalize the inventory strategy, with the greatest possible efficiency.
However, far beyond being just a cost center for storing inventory, today Warehousing management has a very important role in the competitiveness of companies. The reality of the current market, which requires increasingly shorter delivery times, especially when it comes to e-commerce, forces companies to make storage decisions that allow greater agility in processes to meet consumer demands. In other words, storage management has come to be treated as a strategic competitive differential for companies.
More and more companies have realized that investments in storage technology bring competitive advantages. Amazon's use of autonomous robots, for example, allows the stored products to go towards the picking operators, reducing the displacement of employees and shortening the delivery time. automatic picking systems they have also been used in companies in the pharmaceutical sector, for example, mainly for high-turnover products, resulting in fewer errors in order picking, in addition to greater agility in the process.
Finally, it is important to bear in mind that, even with different concepts, stock and storage decisions should preferably be planned together. Inventory policies reflect on storage operations as well as the complexity of storage influences inventory policy.
References:
– ILOS – How to size the safety stock?
– ILOS – The five functions of inventory
– ILOS – New storage role
– ILOS – Review of inventory policy parameters
– UOL (22/06/2022) – How Proteus works, the 1st autonomous robot to work at Amazon; watch video
– SSI SCHAEFER – A-Frame Structure
