In a business that starts with a single warehouse, the inventory report is simple; the total quantity is a single number. When the number of warehouses grows to five, that same report turns into a hard-to-read list.
The real problem is the inability to see which stock in which warehouse is actually sellable. Quarantined goods get mixed up with goods on the shelf.
In this article, we explained how to set up warehouse groups, location hierarchy, shelf addressing, and their impact on reporting.
Table of Contents
Why is grouping necessary?
As warehouses multiply, looking at each one individually ceases to be practical and a consolidated view becomes necessary.
However, a simple total is also misleading; stock in warehouses with different purposes does not carry the same meaning.
Grouping establishes a balance between these two extremes and produces meaningful totals.
It also determines which warehouses will be taken into account in processes such as channel synchronization and order decisions.
We covered the warehouse structure in the company branch warehouse structure article.
Warehouse types
Warehouses are divided into different types according to their functions, and this distinction must be defined during setup.
The main warehouse is the primary area where sellable stock is kept and usually has the largest volume.
Sales floor warehouses are used in retail; they separate the goods on the shelf from the goods in the back room.
The quarantine warehouse is for products awaiting return or inspection and should not be considered sellable.
The workshop warehouse tracks materials transferred to production and is critical for manufacturing businesses.
Group logic
Warehouse groups are a logical layer, not a physical one, and are configured based on reporting needs.
A warehouse can belong to multiple groups; this flexibility enables different perspectives.
The most common grouping is the distinction between sellable and unsellable. This single distinction directly improves ordering decisions.
Regional grouping is also used; warehouses in the same region are evaluated together, and transfer decisions become easier.
The number of groups should be kept moderate; too many groups lead to errors during selection.
Definition of sellable stock
Sellable stock is the quantity that can be relied upon when taking orders, and defining it correctly is critical.
Quarantine, damaged, and sample warehouses must be excluded from this total.
Material transferred to the workshop should also not be considered sellable; those goods are now allocated to production.
Reserved quantities must also be subtracted; goods allocated to another order cannot be resold.
This definition is used both on the sales screen and for marketplace synchronization.
Location hierarchy
In large warehouses, the warehouse level is not enough; the internal location must also be tracked.
Location hierarchy generally consists of aisle, rack, and bin levels.
This structure significantly shortens picking time; products are not searched for, you go directly to them.
Hierarchy depth should be determined according to warehouse size; a single level is sufficient for small warehouses.
Excessive depth increases the recording burden and makes it impossible to keep up to date.
Rack addressing
Rack addresses are the physical counterpart of the location structure and must be legible.
It is essential that addresses are supported by physical labeling; the address in the system must have a visible counterpart in the field.
Location barcodes ensure verification during picking and prevent picking from the wrong shelf.
Addressing logic must be compatible with the walking route; the picking list is generated according to this order.
Placing fast-selling products on accessible shelves also shortens the picking time.
Transfer flow
As the number of warehouses increases, transfer operations become a part of daily operations.
Every transfer must be recorded with a receipt; unrecorded transfers corrupt the data of both warehouses.
In transfers between distant warehouses, the status of goods in transit should also be tracked.
This makes goods that have been dispatched but not yet arrived visible and prevents searching for discrepancies.
We covered the transfer flow in the transfer receipt article.
Impact on reporting
The group structure determines the breakdowns in which inventory reports can be retrieved.
Salable stock reports cannot be generated without a group definition and are calculated manually every time.
Region-based inventory distribution also relies on the group structure and feeds distribution decisions.
Quarantine and damaged stock ratios also become traceable indicators.
An increase in this ratio signals quality or process issues early on.
Channel visibility
In multi-channel sales businesses, deciding which warehouse reflects on which channel is a critical decision.
Reflecting all warehouses to the marketplace increases the risk of overselling and raises the cancellation rate.
Opening store inventory to the online channel also creates conflicts with in-store sales.
The group structure allows managing this decision with a single definition and can be adjusted per channel.
We explained the synchronization setup in the marketplace stock sync article.
Points to consider
Defining more warehouses than necessary increases the transfer load and slows down operations.
Failing to define a quarantine warehouse leads to returned products mixing into salable stock.
Not labeling shelf addresses in the field leaves the location structure only on paper.
Failure to update group definitions also causes new warehouses to be excluded from reports.
Definitions are managed in the stock module and reflected in all movements.
Frequently asked questions
Can a warehouse belong to more than one group?
Yes, it can; this flexibility enables different reporting perspectives at the same time.
Is shelf addressing necessary for every business?
Not necessary; in small warehouses, the recording burden may outweigh the benefit, and the warehouse level is sufficient.
Can a virtual warehouse be defined?
Yes, it can; situations such as quarantine and goods in transit are tracked with virtual warehouses.
Can the number of warehouses be increased later?
Yes, it can; however, past movements remain according to the old structure, and periodic comparison is affected.
Warehouse groups are a logical layer that makes stock reports readable and clarifies the salable quantity. Simple to set up, major impact.
At the very least, establish the distinction between salable and unsalable; this is the single step that improves order decisions the most.
Be sure to define a quarantine warehouse as well; otherwise, unchecked returned products will mix into the salable stock.
Evaluate shelf addressing based on warehouse size; in small warehouses, the recording burden outweighs the benefit.
Manage channel visibility through groups as well; reflecting all warehouses onto the marketplace generates oversold orders.
By consulting with the EQLEM team, you can set up your warehouse structure.