There’s no understating the importance of inventory management. When you’re running a product-based business, getting the right products to the right customers at the right time in the most cost-effective manner possible is a mission-critical goal. But once that’s done, it’s important to take things a step further by pursuing integration.
If you’re a relatively new business, a warehouse management system probably isn’t the first software you invested in. Chances are, the first software system you invested in is an accounting tool like Quickbooks. Quickbooks dominates the accounting software marketplace. It has about 80% market share and supports the accounting and finance of about 29 million businesses in the United States.
Of course, as your inventory-based business grows, an accounting system alone is not enough. You need a system that’s designed to help you keep track of the movement of your goods throughout your storage area.
And as your storage area grows, and is eventually swapped out for a warehouse, you need a more sophisticated way of centralizing and overseeing your warehouse operations. In other words, you need a warehouse management system.
As you add more systems to your suite of enterprise resources, one of two things happen. You either:
- Use these systems in isolation from each other as tools for their respective departments
- Integrate these systems with your other systems to create a connected data ecosystem within your warehouse
While the first option is easiest, the second is the most effective. Integrated systems within a warehouse lead to:
- Easier administration. Business leaders and the people who support them can access one tool rather than toggling between multiple software platforms. As a result, they can easily access the information they need across the entire business and become experts on one system rather than struggle to learn many.
- Better data analysis and insights. When a company’s data exists within multiple isolated systems, it’s difficult to conduct meaningful data analysis. The best insights come from analyzing data across the entire business and understanding how functions are interrelated and impact each other.
- Greater data security. When data exists in multiple different locations, data governance is challenging. It’s harder for a business to monitor and secure a wide variety of unconnected systems. Plus, employees who are overwhelmed by a large number of portals may circumvent best practices by keeping data within spreadsheets and emails as a way to make their jobs easier.
- Real-time data. Perhaps the most well-known benefit of an integrated system is the real-time component. Reconciling different systems or manually transferring data from one system to another is a time-intensive process. On the other hand, data is automatically shared within an integrated system, allowing you to quickly access the numbers you need.
While the overall purpose of inventory management is to ensure the viability of your company, there are two sub-purposes that inventory management serves:
- Financial accounting
- Operational efficiency
For instance, your Chief Financial Officer wants visibility over inventory because it’s a critical component on a company’s balance sheet. It’s also scrutinized by investors.
On the other hand, your Chief Supply Chain Officer or Warehouse Manager is concerned about inventory management from a customer service point of view. They want to ensure that there are enough goods in the warehouse to get to customers on time, without tying up capital in carrying costs.
Typically, these two parties conduct their inventory management separately and when needed, they reconcile their numbers which is an incredibly arduous process.
On the other hand, with a warehouse management system that’s integrated with Quickbooks, this happens quickly and easily.
But what about if your accounting system already tracks your inventory? Do you even need a dedicated WMS with its own inventory management system?
While Quickbooks helps you put your inventory into context to complete accounting and finance tasks, such as creating financial statements, it does not allow you to manage that inventory and the larger warehouse. A WMS that integrates with Quickbooks allows your business to do the following.
Integrating a WMS with Quickbooks Gives Access to Advanced Warehouse Functions
When your finance team uses Quickbooks for its year-end analysis, one of the most important numbers they’ll look at is the inventory turnover ratio. It indicates the “number of times a company sells and replaces its stock of goods during a period.” The inventory turnover ratio is a great indicator of how effective your company is at converting inventory into sold goods.
All your Quickbooks system can tell you is whether you’re doing well (you have a high inventory turnover ratio) or poorly (your inventory turnover ratio is low). What you need is a system that supports inventory management, not just inventory reporting.
A warehouse management system integrated with Quickbooks allows you to do this with advanced warehouse management features.
Sophisticated Picking Processes
Picking is one of the most vital processes within your warehouse. If you want to get orders to customers on time, you need workers who can quickly retrieve them so they can be packed and placed on your outbound trucks.
That said, even the most devoted worker has limits to how quickly they can walk or how many items they can carry in one trip. Throw in the complication of multi-item orders and a massive warehouse, and you’re looking at a recipe for constant warehouse waste.
Warehouse waste is any instance where your warehouse is using resources, including time, people, space, and materials, inefficiently. The warehouse waste most commonly associated with the picking process is motion waste, which is the unnecessary movement of people.
Most of the time, motion waste is unintentional. For instance, a worker with a pick list may work their way down a pick list, criss-crossing around the warehouse, only to realize after the fact that it would have been efficient to tackle the picks in batches. That said, the amount of time it would take to group items on the pick list based on their location within the warehouse would be significant, so employees simply grab items one by one.
On the other hand, a sophisticated warehouse management system integrated with your Quickbooks software allows you to support sophisticated order picking processes like batch picking, wave picking, and zone picking.
For example, batch picking groups individual items from several orders. If you’ve got several orders, and each item includes makeup brushes, mascara, eyeshadow, or eyeliner, you figure out how much of each item you need and collect them in batches: 47 makeup brushes, 22 mascara wands, 32 eyeshadow pallets, etc.
Once the correct number of each item is packed, they’re taken to a staging area and sorted. This ensures that workers aren’t criss-crossing the warehouse in an inefficient way.
Of course, it is incredibly difficult to facilitate this manually. A sophisticated warehouse management system is required to create lists for batch picking. The same idea applies to wave picking. This method schedules picks in “waves” that are tied to a specific schedule, like the schedule of outbound trucks. Your warehouse inventory management system ensures items are picked in the correct order.
For example, if a customer requests and pays for next-day shipping, their order can be bumped up to the first wave to ensure it winds up on one of the day’s outbound trucks. Finding those orders and pushing them to the day’s pick list requires a warehouse management system.
A warehouse management system also supports directed putaway methods. A timely putaway process ensures items are physically entered into inventory in time for customer orders. A sophisticated WMS optimize your walking paths and provide the best routes for your workers to take either while putting items away or picking them for orders.
A warehouse management system also allows you to streamline your shipping processes. It can assist with pack type selection, to ensure your workers choose an appropriately sized box. This doesn’t just mean finding a box that’s big enough. It means finding a box that isn’t too big, since using large boxes for small items is unnecessarily expensive in terms of material and shipping costs.
A WMS can also help your workers pack items into boxes correctly by using 3D software that projects the right packing formation on a screen. This reduces the amount of time workers spend manipulating and fitting items into packing boxes.
Integrating a WMS with Quickbooks also allows you to optimize a number of important functions including purchase order management, billing statements if you’re a 3PL company, and invoice generation and distribution.
Managing Purchase Orders
Businesses process 7 documents, on average, during each purchase cycle, which extends the purchase cycle. This in turns delays order fulfilment and invoicing which isn’t good for a company’s cash flow. On the other hand, if information could automatically flow from a customer to the company and to the relevant departments within, the entire process could be sped up.
Once a purchase order is recorded in Quickbooks, that information can be fed to warehouse managers who know what they need to work on to fulfill that order in time. The alternative is waiting for someone to manually enter that order into the warehouse management system.
Managing Billing For 3PLs
If you’re a 3PL, integrating a 3PL WMS with Quickbooks takes the guesswork out of billing. Oftentimes, it’s difficult for 3PLs to capture all of the revenue to which they’re entitled. The sheer complexity of the billing, which includes variables like storage space and transportation, leads third party logistics companies to simply bill for what they think they’re owed so they can get an invoice out the door.
In other words, they’re leaving money on the table, because it’s difficult to track and record what they’re owed for specific services.
On the other hand, integrating a warehouse management system with Quickbooks helps solve this problem. Instead of providing the service and retracing their steps later, 3PLs can create customer categories within their warehouse management system.
This way, every warehouse activity that’s initiated - inbound logistics, putaway, picking, packing, shipping - for a specific customer is tracked. And once it’s tracked it can flow directly to the Quickbooks accounting system for easy invoicing.
And these are only the basics. Tracking warehouse space and warehouse activity should be the starting point for any 3PL. Integration allows 3PL business leaders to enhance their processes further by making it easy for 3PLs to offer and track different rates for customers, varying contract requirements and service level agreements, rebates, volume-based discounts, and more.
In addition, you can back up your billing with proof. If a customer inquires about their bill, you have the systems in place to find the specific activity or request that led to a specific line item on their invoice.
Finally, a WMS integrated with Quickbooks ensures you’re billing customers the right amount at the right time. 3PLs have different billing arrangements with their clients, and keeping on top of the billing periods is an incredibly difficult task to conduct manually, especially as your 3PL scales up. You can track when specific activities took place for each customer through your warehouse management system and use billing codes to transfer them to your Quickbooks system, where invoices will be generated on the agreed schedule.
Integrating Your Warehouse Management System With Quickbooks Is A Smart Business Move
Integrating your systems is a business best practice. In fact, many of today’s companies opt for enterprise resource planning (ERP) systems to reap the rewards of data sharing across their organization.
ERPs may not be a justifiable expense for small-to-medium sized businesses, but if your business falls within that category, it’s still a good idea to apply the philosophy of an ERP: integration across your various systems. And integrating your warehouse management system with your Quickbooks software is an ideal place to start.
If you’d like to see how Quickbooks integrates with Logiwa, schedule your demo today.
Written by Ruthie Bowles
Ruthie is a content marketing consultant for Logiwa. Her specialties include small business development and inventory management.