Optimising Warehouse Costs

Often, warehouses represent a significant, if not the largest proportion of operating expenses for SMEs: staff, stock, space rental, facility maintenance as well as cost of utilities (lighting and heating in particular). Therefore it is important for businesses to make sure everything is planned and organised in a way appropriate to make savings and enhance efficiency and achieve good warehouse management.
 The first step to optimisation is the investigation of the warehouse organisation and the weight of each warehouse feature, as well as the analysis of the physical fulfilment of orders to understand the time, the labour and the moves involved.
The second step is to ensure the warehouse organisation includes the most up-to-date and relevant technology.
 
Labour: Logically, the least automated the warehouse, the more expensive the human resource cost category. Additionally there are often other costs associated for this specific department such as overtime or temporary staff (for peaks of activity), penalty rates for shift work or bank holidays worked, etc.  Linked to this expense are training opportunities provided, either for mandatory courses such as health and safety, use of equipment or to improve productivity.
 
Space and storage: Optimising space is essential to achieve warehouse savings.

This involves:

  • Designing the best warehouse layout for staff and products to reduce unnecessary movements and time between picks, improve efficiency and space utilisation.  
  • Displaying products ergonomically to reduce picking time, reduce workers’ moves and guarantee a healthy stock rotation as well as easier replenishment and inventory.
  • Making the most of each square meter used with high and narrow racking – there are many systems available depending on the type of products stored.
  • Measuring aisles for easy circulation of lift trucks and pallets without loss of space whilst reducing risks and ensuring employees safety.

 
Warehouse operations

Developing online ordering reduces paperwork, manpower needs and therefore costs. If there is no online order system, communications between customer service/invoicing department and the warehouse need to be investigated to make sure operations run smoothly and accurately.
The use of technology in warehouse operations helps to save time, boost productivity and helps with stock control, best before dates and traceability: this includes automatic labelling, product barcodes and hand-held barcode readers, scanning guns, etc.
Other positive side-effects of automation and use of technology are the reduction of waste – whether paper, product or packaging waste, menial tasks, errors and client claims.
 
Wastage and recycling

Planning and electronic management of stock should greatly reduce waste (products, packaging or labels) by obsolescence or expired dates – though not together eliminate the risk.
 
Utilities, especially heating and lighting represent huge expense. Sometimes the best solution or the cheapest may just be for the company externalise the warehouse operations.
 
It takes time – and a great deal of expertise – to set up a good warehouse management processes and take into account the individual characteristics of the company – type of good stored, staff, space available. And as the warehouse does not function as a self-contained unit, the links in terms of organisation, relations, software and technology, with other departments (especially invoicing and marketing) will need to be investigated as well.

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