5 Key Areas to Focus on in the Pursuit of Warehouse Cost Savings
A Director of Operations, Warehouse Director or Manager, or even the Director of Supply Chain or Logistics, are always in the pursuit of continuous improvement as well as warehouse cost savings in both time and money. With the myriad of tasks and personnel, a director or manager must oversee, how on earth are they to get everything done? Well, it starts with focusing on the areas and objectives that can meet your desired outcomes. Are you using the mantra “Work smarter NOT harder?” In today’s modern society, often, the stop gap in efficient productivity in your warehouse is typically one of two things: bad process & getting caught up in the weeds of tactics. This is solved through best practices, efficient and proven strategy, proper measurement of your tools and people, and the use of effective technology which doesn’t add bloat, but is an enablement tool to provide a tangible Return on Investment in the way of reduced time and costs.
In today’s blog post we will go over five key areas those managing or directing company warehouses can focus on to achieve reaching your desired outcomes.
Labour costs are typically the largest expense in the warehouse, and in many operations, such as third-party logistics providers (3PLs), it can account for up to 50% of a warehouse’s total operating costs. These costs can be cut down drastically when you use shared warehousing space.
Many companies plan for and track workforce schedules and actuals through spreadsheets, a manual process prone to errors. This process does not generate an accurate, real-time view of tasks in the warehouse or allow management to identify inefficiencies. A big driver in the first part of warehouse cost savings is knowing your data so you can apply analysis and then create a strategic plan to improve. Integrating labour management with a company’s warehouse management system, can reduce these costs up to 30% by identifying areas of high performance as well as the comparable inefficiencies.
- Invest in training/re-certification
- Cross-train all employees
- Focus on retention/implement retention plans
- Use temporary/contract labour help where applicable
- Use flexible time
- Revise your labour scheduling strategy
- Observe starting and quitting times
- Move your time clocks
- Monitor individual productivity
- Implement a pay-for-performance program
- Reward employees who arrive early/stay later
- Provide Safety/OSHA Training, at least quarterly
- Implement Vendor Management System (VMI)
- Start a suggestion box: Listen to your employee’s ideas.
- Use cross-functional teams to solve problems
- Have teams compete to meet overall warehouse goals and objectives/KPIs: The old saying of, “You can’t improve what you don’t measure” is certainly true. An effective measurement and reporting process can improve performance and provide warehouse cost savings.
- Implement a reward system for major victories
- Reduce inventory with cross-docking
- Target inventory accuracy: goal: 98-100% accuracy daily
- Improve processes daily
- Get rid of excess inventory: create a Material Review Board (MRB) to review: obsolete, excess, slow moving inventory monthly
- The process returns more efficiently. Returns cost more than orders to process. Untimely processing of customer credits, refunds and exchanges can damage customer service. Our assessments look at the use of staff, people, space and systems to improve productivity.
- Optimize space: Land cost is one of the largest contributors to costs in warehousing. Cost per pallet stored should be questioned to ensure space is optimized. The type of racking within your warehouse should utilize the height of your warehouse. Aisle space is also a consumer of space and having the right equipment to optimize this space can contribute to warehouse cost savings for the future.
- Slot and Re-slot regularly based on demand/sales trends
- Reconfigure rack configuration
- Optimize staging areas to improve throughput to the customer
- Replace checking with auditing
- Minimize packaging
- Keep supervisors on the warehouse floor
- Focus on error reduction: goal: no errors
- Make housekeeping a high priority
- Control theft through improved security
- Improve receiving process operations
- Damage reduction: damage to goods/SKUs is expensive. Take good care of handling packages.
- Improve SKU tracking: RFID, bar coding
Optimize Equipment Use
- Standardize your batteries
- Make equipment does double-duty
- Manage equipment service vendors
- Consider short-term rental
- Evaluate leasing rather than buying
- Use preventive maintenance (PM) to avoid equipment failure during a process
- Consider a new, advanced Warehouse Management System (WMS). If you are not using a WMS, most likely it is much harder to realize warehouse cost savings.
- Use Electronic Data Interface (EDI) to communicate with your customers/suppliers
- Implement voice-directed picking and light picking systems
- Reduce dwell time
- Convert to high-efficiency lighting
- Investigate efficient fans
- Use solar egenrgy
- Turn off the outdoor sprinklers
- Warm up with dock blankets
NWCC’s national warehousing network gives you a scalable logistics capacity – for space, labour and strategically aligned Hub and Spoke distribution network to make sure timely delivery and optimum cost saving to our clients. To request a consultation please log on to our website www.nwccindia.com or call us at 1800123 4855