Efficient Warehouse Management

There is a direct link between warehouse efficiency and customer experience/ retention. When your warehouse efficiency slips, your customer retention rate will reflect that. When your customers choose to go with your competitor who delivers product faster, your bottom line will take a hit.

Inefficient warehouse operations can lead to long waits and inconveniences, which are the top reasons customer will stop buying from you. Inefficient operations also lead to wasted labor. 

While you may not have the budget to fully automate your warehouse, there are a number of things you can do to improve efficiency and reduce operating costs.

Here are ways to improve warehouse efficiency and reduce operating costs in the long term:

1. Optimize Warehouse Storage
2. Improve Pick and Stow Routes in Your Warehouse
3. Upgrade Technology in your warehouse
4. Create an Inventory Review Process
5. Review Product Replenishment Practices
6. Standardize and Audit Your Workflow
7. Consider Automation in the Picking Process

1. Optimize Warehouse Storage

More consumers are shopping online, which means a greater demand for suppliers and a growing need to expand inventory.

More product variants means increased inventory as more SKUs are added to your warehouse. While warehouse square footage space doesn’t cost as much as other commercial property, it’s not always easy to expand.

Setting up a second fulfillment location or expanding an existing one can be costly. Where you’re opening your new location factors in heavily to the price.

Instead, you should first optimize the space you have. Build storage upward and see if you can add extra storage aisles by minimizing the distance between aisles. One way to do this is to create alternating one-way aisles instead of two-way traffic aisles.

In addition to getting more storage from your warehouse space, this can greatly improve the efficiency of stow and pick:

• Equipment handlers can access the aisle on either side of the aisle while picking or stowing
• Minimizes equipment collisions with one-way traffic
• Minimize travel time from aisle to aisle
• Improves warehouse safety by eliminating the need for employees to exit equipment

Optimizing the design and flow of your warehouse can significantly increase storage as well as productivity and performance. Most small businesses don’t have the capital to sink into costly warehouse planning systems. However, you can optimize your warehouse space and performance with a pen, some paper, and some time to look at your warehouse in a new way.

2. Improve Pick and Stow Routes in Your Warehouse

One of the biggest resource consumers in warehouses is the amount of time spent by pickers moving between orders and locating product to be picked.

In fact, labor constitutes about 50-60% of the operating budget for the average warehouse and studies show that order picking counts for roughly 60% of a warehouse's labor cost.

You can reduce a good chunk of that overhead cost by implementing a WMS/ Warehouse management system. When implemented, this system records all product data and its location in the warehouse. As your warehouse receives products, the system will direct where those products are placed.

In addition, a good WMS will optimize the walking path for pickers. Based on product variables and incoming orders, the system will provide pickers with an optimal route through the warehouse from product to product. This greatly reduces the time spent walking and searching for product which is a drain on budget as well as employee energy.

3. Upgrade Technology In Your Warehouse

Most businesses understand that technology can improve efficiency and increase order handling speed. That all equates to cost savings, but only if you’re using the right equipment that’s up to date.

Most people think of barcode scanners when they picture warehouse mobile devices. However, your employees can also use smartphones and tablets loaded with a WMS software, to receive pick orders and optimal picking routes. Thanks to WiFi, they can be anywhere in your warehouse and receive the order.

Ergonomically designed handheld devices may have a leg up on other mobile devices. Besides helping your employees avoid injury, they can perform many of the same functions. They also come equipped with RFID scanners, cameras, and touchscreens.

Upgrading technology, including mobile systems and the use of pick-to-light, RFID, and pick-to-voice tech, reduce picking errors rates by 60-70% compared to aging manual methods. That’s a significant cost savings when you calculate the cost associated with processing order returns, shipping costs, labor related to customer experience, customer credits, and more.

4. Create an Inventory Review Process

We may be getting product out to customers more efficiently than ever before, but that’s not reducing the amount of time product lingers in your warehouse. According to Supply Chain Digest, companies are still holding on to more inventory – likely related to the increase in the number of SKUs being stocked each day.

This is where you need to use data to review your inventory, because dead inventory filling your warehouse costs you money.

Optimize your inventory by looking at metrics. Audit your inventory and identify the inventory that’s not moving. Metrics to monitor include:

• Average days to sell inventory
• The inventory turnover rate of products
• The return on investment and how it diminishes based on how long you hold the product
• Gross profit of products (price minus cost to make, hold, and sell the product)

Holding inventory for too long eats at profit margins and costs you money. Find a way to move those products and/or eliminate them from your inventory.

5. Review Stock Replenishment Practices

As warehouse operations grow, it’s common for a company to hire a full-time inventory controller. This individual is in charge of monitoring inventory levels and handling reorders to maintain stock.

Unfortunately, human error plagues manual replenishment practices. Inefficient stock replenishment can cost you in two ways:

• Overstocking inventory that doesn’t move
• Understocking inventory resulting in out-of-stock and lost customers

Warehouse management systems can help automate some or all of this process. By setting periodic automatic replenishment levels in your inventory, you can create triggers for low inventory to ensure more product is ordered. You can also set a maximum inventory cap to reduce the chance of having too much product on hand.

6. Standardize and Audit Your Workflows

From the time a product arrives in your warehouse to the point where it leaves, every activity and process for moving that product should have an established workflow. Without a workflow in place, employees either work in a way that is most efficient for them or most comfortable.

What’s efficient or comfortable for the employee may not be the most efficient or profitable way for the company.

With automated workflow, you can ensure that every employee operates within the same standards. Most importantly, you can monitor individual employee performance against benchmarks established for that segment of the workflow.

When fulfillment issues arise that can impact operational costs, a quick audit can typically reveal the workflow bottleneck. If it’s a performance issue, management can work with the employee to quickly correct the deviation and restore the workflow.

Once case shared by XYZ Logistics co. showed how an employee responsible for unloading trailers was struggling to hit productivity goals within his area. When management personally reviewed the employee’s performance, they discovered the employee had added a step in the unloading process. After identifying and correcting the problem, the employee easily hit the established performance goal and productivity was restored.

Before you audit and change any workflows in your warehouse, remember that your employees the heart of that process.

Workflows rely on people, not only to complete the task but also to improve them and make your warehouse more efficient. Turn to your staff when you want to optimize workflow efficiency. Create a feedback loop and allow your employees to show you ways they feel each task can be improved.

Some measurement will be required, but even seemingly simple improvements in the packaging and material handling process can reduce a significant amount of waste and lost revenue.

7. Consider Automation in the Picking Process

As your business grows you may need to reconsider the picking process within your warehouse. Smaller operations can function well enough with manual pickers delivering products to the packaging and the shipment side of your facility. This approach isn’t scalable and will begin to impact productivity.

For example, the average order picker can pick between 60 and 80 products per hour when routes are optimized in your warehouse. This pick rate can be improved to as much as 300 pieces per hour when utilizing sorters and conveyors that can move product through the facility.

Of course, there is a cost involved with upgrading and adding automation. However, by reducing travel time, you can dramatically increase the order picking productivity of your fulfillment center and ultimately reduce costs.

Every Improvement Has the Opportunity To Reduce Operating Costs

The above recommendations can each help improve the efficiency of your warehouse, and many revolve around leveraging Technology. An audit of your operations can help you determine bottlenecks and find opportunities to improve warehouse efficiency. Just remember that a single audit will likely reveal some cost-cutting measures, but not all of them.

The best approach is to implement a warehouse management system and continually monitor KPIs and performance. Over time, each change you make will continue to reduce costs and innovate your warehouse operations.