How to master multilocation inventory management

Multilocation inventory management is a hurdle that manufacturers need to pay especially close attention to if they want to make sure growth is not stunted.

Setting up multi location inventory management is a tough task for many a growing manufacturer, especially if they also have production sites spread across the land. That’s why gathering the right tools and strategies is vital to making sure that business still runs as normal.
Last updated: 23.02.2023

Setting up multilocation inventory management is a tough task for many a growing manufacturer, especially if they also have production sites spread across the land. That’s why gathering the right tools and strategies is vital to making sure that business still runs as normal.

There’s no sweeter sight than the steady growth of your manufacturing business.

As you watch the fruits of your labor come to the fore, and your sales reports read as fine as ever.

But there’s no doubt that success brings challenges in itself. And one of the main obstacles to taking your business to the next level is always going to be a matter of space.

Whether you have decided to take your operation global or even just require extra storage, it’s very likely that at some point you will encounter issues with multilocation inventory management.

In other words, you are going to have difficulties managing stock and how it moves around, especially if you also manufacture at multiple locations too.

The complications can be endless when there is more than one production schedule and stock room to manage. And without the proper tools, you may well feel that your growth is getting stunted.

Like a flower that’s outgrown its pot. Without a new pot, your business will lack the space to grow and risks suffocating.

Now, that might seem like a tough hill to climb. But there are methods you can use to lighten the load, and thankfully there is smart manufacturing software out there that deals with this precise issue.

But before we get to that, let’s dive into what multilocation inventory management really means, and how it applies in the modern world of manufacturing businesses.

Why do businesses need multi inventory management?

Now if you haven’t quite come to the point of requiring multiple sites for inventory, you might be wondering what all the fuss is about.

After all, how much space do you really need?

But the point of having multiple locations for your inventory isn’t always just a matter of meters squared.

The reasons for needing to manage inventory on this scale can be incredibly wide.

So, here are just a few of the big hitters:

Sync with manufacturing 

Though your production line and manufacturing routing are likely to have started out in one location, that doesn’t mean it’s going to always stay that way.

In fact, many manufacturing businesses find themselves spread out across multiple manufacturing sites due to the availability of skilled labor, rent costs, and even direct access to consumers.

Especially if they are selling to a range of customers across state or national lines.

But that does mean that you’re also going to want somewhere to store your materials in each of these locations. Otherwise, you’d constantly have to be ordering materials for each set of orders.

Imagine the chaos.

Outsource manufacturing 

There is a limited set of companies that have the resources to totally manufacture their products globally.

You need to have some hefty resources to manage production and inventory this way.

But there are plenty of businesses that outsource manufacturing to companies domestically and abroad.

Roughly 39% of companies in the US claim to be increasing their levels of outsourcing in recent years. Outsourcing or contract manufacturing is often cheaper and frees up resources you can better spend elsewhere.

Ideally, you want to be in a position where you can not only track the inventory and production status of your partners but also purchase materials for them too – contract manufacturing software can be of huge help.

Lean manufacturing

Multiple sites can often be a part of one single production line.

Like building a car, you have your seats and engines built in one factor, and those subassemblies are sent to another location to be fitted into the car.

The idea being that subassemblies are rarely stored for longer periods, and are almost always on the move to the next workstation. This approach is also known as lean inventory, a system that has become commonplace in manufacturing since its inception.

Risk management 

There’s a lot on the line when you stick all your inventory into a single warehouse.

Any problem that occurs with transport or even the unlikely event of a fire could have drastic effects on the business.

Having a backup location for inventory mitigates that risk and means that you have a fall-back option in unfortunate circumstances.

Pro tip: Calculate cost of goods (COGs) with inventory valuation methods and put a value on your remaining inventory levels. Explore the different types of inventory valuation methods your business can use when checking in on your stock levels.

Potential to lower costs

On first look setting up a secondary warehouse might seem counter-intuitive when it comes to reducing costs.

But consider the fact that the costs of transportation and labor can be much higher depending on the location of your warehouse. If you are further from consumers and delivery infrastructure, then there’s going to be greater costs for you to incur.

Plus, you can optimize your order fulfillment time and satisfy customers with faster deliveries.

Retail Outlet

Many manufacturers and direct to consumer brands have found that selling stock in their own retail outlets can bring in a whole new line of customers.

Even staples of this model such as Away and Glossier have their own flagship stores.

This does also mean though that they have to start inventory management multiple locations, even if for just finished goods.

Retailer or reseller inventory

Despite the rise of the direct to consumer business model, many manufacturers still use middlemen to sell part of their inventory.

Most of the times it’s not needed for them to track inventory in these locations, but it does happen under certain circumstances. For example, if you have a consignment inventory agreement with a reseller, in which case they only pay for the stock after it is sold.

PRO TIP: Looking to organize your inventory? Try out our free manufacturer inventory spreadsheet template to see if it can help you get started.

Multilocation inventory management complications

Managing communication for multi location inventory management can be very tough for growing manufacturers.

Right, so we know why manufacturing businesses need inventory management for multiple locations. But what are the challenges that come with this approach?

Unsurprisingly, there are more than a few problems that arise when you split your cozy business up around the land.

For one, you’re now going to have to maintain stock counts for more than a single warehouse. That takes time and organization, especially if you are moving materials between the two.

And the management of communication between warehouses is, of course, an issue in itself. Employees are much more likely to miscommunicate when they are not working in the same location.

This can lead to bottlenecks in both manufacturing processes as well as managing orders.

But even more important than issues of communication and stock counts is that manufacturing businesses find it difficult to manage their production in line with inventory levels when multiple sites are involved.

Imagine setting up your production schedules when you have to also factor in materials that are being stored in a completely different location.

It gets especially tricky if you are also manufacturing in multiple locations and need to manage material inventory at the same time. Many organizational issues can arise when materials need to be used for different products and these crossover warehouses.

No doubt that managing inventory for multiple locations is tough when raw materials and production are thrown in the mix.

Don’t fret though.

There are solutions here, some of which are going to make an immediate difference.

Tips for inventory management in multiple locations

It can some time to find the right combination of inventory management multiple locations, so don’t fret if your approach isn’t defined straight away.

1. Adopt a multilocation inventory management system 

The right software can take you a long way when it comes to multilocation inventory management.

It’s important that you look for solutions such as material requirements planning software that can manage multiple locations, inventory, and production at the same time.

Because as vital as it is to manage stock, there’s no point in the endeavor if you don’t consider how your materials are being used and your orders being fulfilled.

2. Locate warehouses artfully 

Don’t underestimate the impact geographical location can have on your business.

You want to position your warehouses as closely as you can to each other, whilst also keeping them near consumers too. This way you can save on transportation and logistical costs.

Just be aware that the closer you are to consumers and urban areas, the more likely you are to pay a higher cost of rent, labor, and manufacturing overheads. Striking the right balance is key here.

3. Plan for demand 

Forecasting customer demand is a tough task to undertake regardless of your industry.

But taking the time to work on demand planning means that you will better be able to optimize your inventory. In which case, there is less chance you will incur carrying costs due to overstocking, a high-risk event with multiple inventory locations.

4. Optimize warehouse layout 

The way your warehouses are laid out can have drastic effects on the efficiency of your overall business.

You should take the time to make sure your various material inventory is as close as possible to the appropriate workstations. And keep products that are sold most often close to your shipping area.

In the same way, you should carefully consider which of your warehouses store different stocks. Any unnecessary additional transportation can ultimately delay deliveries to your customers.

Even a detailed map of the warehouse posted at the entrance can help employees gain a quick grasp of where everything is.

5. Set safety stock 

Knowing when to purchase more materials becomes a lot trickier when inventory is spread out. Especially if production also occurs in different places.

As a result, you will have to pay more attention to your stock levels to ensure you don’t run out and cause delayed deliveries.

Ideally, you set an amount of safety stock for each of your items, as well as reorder points to make sure you don’t have to dip into your safety net more than necessary.

Multilocation inventory with smart manufacturing software

Katana tracks your entire order fulfillment process, from multi location inventory management to manufacturing and sales. But what’s really great is that you can split your locations up so that they take on these elements accordingly as well. If a location only holds inventory, then you will just have the options to manage stock and purchases, which makes organization much simpler.

Katana tracks your entire order fulfillment process, from multilocation inventory management to manufacturing and sales. But what’s really great is that you can split your locations up so that they take on these elements accordingly as well. If a location only holds inventory, then you will just have the option to manage stock and purchases, which makes the organization much simpler.

Alright, so clearly there are ways that you can manage your multiple sites for inventory without totally losing track.

But there are a lot of details to be managed here.

Materials, finished products, purchase orders and not to mention the warehouses themselves.

That’s why many manufacturing businesses make use of software that supports multilocation inventory management. These can help automate your inventory management and keep track of how stock moves between locations.

Ideally though, you should look for a solution that also includes support for production scheduling and multiple manufacturing sites as well.

Katana Smart Manufacturing Software is an all-in-one solution that tackles inventory, production, and sales all at the same time. There is an emphasis on businesses with multiple locations in use for any of these elements.

The system will keep track of quantities of materials and inventory for each of your locations separately. On top of that, whenever a sales or manufacturing order is fulfilled, the necessary inventory will be reduced automatically.

This means that your inventory for each location is clear to see, in real-time, and in accordance with your production schedule.

So, let’s imagine for example that materials are running low in one location for a set of sales orders, but you have a surplus in the other warehouse. With Katana, you can quickly make a stock transfer from one location to another other and your quantities will be updated automatically.

This way you can manage your manufacturing business from a single, visual platform and eliminate the need for constant tedious calculations altogether.

If you’re more of a visual person then be sure to check out this video explaining Katana’s multilocation features.

But that’s just the start, Katana also offers:

  1. On-demand access to your manufacturing costs
  2. Sync accounting with your QuickBooks
  3. Manufacturing inventory management and material inventory
  4. Production scheduling software functionality
  5. Floor-level control for manufacturing
  6. Integration with ShopifyWooCommerce, and other e-commerce platforms
  7. Efficient material purchasing plans
  8. A way to keep your entire business workflow on a single platform

Ultimately though, you shouldn’t see multilocation inventory management as a beast that needs taming. We know it might be hard to do considering the challenges it initially presents.

But rather see it as an opportunity to lower costs, improve efficiency, and most importantly, grow your business.

Just take your time and use the right tools.

It won’t be long before the struggle is behind you and fresh markets lay ahead.

Katana ERP

Katana Team

Katana gives thousands of manufacturers a live look at their business. Manage all the moving parts of your business and unite the apps and services you use in one visual platform.

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