People often think that managing a warehouse is pretty simple; all they have to do is arrange the inventory so it can be found easily. But the fact is, managing a warehouse is not just about putting everything in place. It’s also about maximizing productivity while reducing costs and save money. There are a number of costs involved in warehouse management, such as shipping, labor, storage, and more.
Most warehouse managers are always in search of continuous improvement as well as warehouse’s cost savings in both time and money. As the cost of labor is increasing, so with the increase in the minimum wage, warehouses are focusing on gaining more productivity per labor hour. Well, there are certain ways to reduce costs on warehouse operations that can help you save both time and money.
Consider these factors mentioned below that will go a long way to save money on warehouse operations.
Labor cost is one of the largest expenses in warehouse management. In operations like third-party logistics providers, it can account for up to 50% of a warehouse’s total operating cost. Many companies even track workforce schedules through spreadsheets to save costs, which is a manual process prone to errors. But, this process doesn’t generate an accurate, real-time view of tasks in the warehouse.
Though, if you combine labor management with your company’s warehouse management system, it can reduce costs up to 30% by identifying the areas of high performance as well as the comparable inefficiencies. Consider these practices to save on labor costs.
- Invest in training or re-certification
- Cross-train all employees
- Focus on retention and implement retention plans
- Use temporary labor help where applicable
- Revise your labor scheduling strategy
- Implement a pay-for-performance program
- Reward employees who arrive early and stay later
- Implement the vendor management system
Implementing these practices can help you save a lot on labor costs.
There is always some space available in a warehouse to expand above existing racking. If you have existing pallet racking and it doesn’t reach the full height of the warehouse then you can easily expand it completely using your warehouse height for maximum storage. Look around your warehouse at the picking, dispatch areas, loading bays, and potentially other storage space. Moving some things around and utilizing the area with additional storage can free up massive amounts of new space.
The benefits of expanding the height of racking will depend on the weights and types of products you want to store and what sort of material handling equipment you have to access the pallets. But make sure that the added height is adequately supported and easily accessible.
Optimize Storage Space
One of the largest costs that contribute to warehouse costs island cost. So before making any plans for improvement or expansion, having a clear idea of what you already have in place to work with is vital. Compose a detailed floor plan of your warehouse space, including entrances, exits, stairways, and aisles. The cost per pallet stored should be questioned to ensure that space is optimized.
The type of racking you’re using in the warehouse should utilize the height of your facility. Having the right equipment to optimize the space can also contribute to cost savings for the future.
Make The Space Adaptable
We all know that managing a warehouse is a moveable feast as things always keep changing, such as technology, processes, rules, and regulations. So having a space that is adaptable to the changing needs of your business is crucial to keeping up with developments within your industry. In order to ensure long-term sustainability, make sure your warehouse space is configured to allow for adaptation.
As the product lines evolve and the customer base grows, the requirements will differ accordingly. Try and think what can possibly impact the way you work, and then look at your warehouse layout and see how flexible your space can be to any new developments.
Install A Mezzanine Floor
If the height of the ceiling in your warehouse is high enough, then consider installing a mezzanine floor. It is a great way to utilize space that would otherwise be wasted. A mezzanine floor can substantially increase and in some cases even double the available space. These floors are installed as an intermediate level within one floor of the existing building, provided there is enough height to accommodate it.
These floors provide a stable, easily adaptable solution that can add years to the life of your warehouse. A mezzanine floor not only gives you extra level upstairs but also provide additional storage on the ground floor.
Hire Effective Frontline Managers
Knowledgeable and effective managers know that reducing costs is all about execution. Their ability to efficiently manage all aspects of fulfillment radically affects your costs, worker morale, and the quality of customer order fulfillment. Train your managers to understand the needs of their individuals.
Provide them with an exposure to the aspects of your business that will help them understand your merchandise, your customers, and vendors. If you have a team of effective frontline managers then you don’t have to worry about warehouse operations.
Warehouses often face an increase in costs due to operational errors, so focus on reducing errors within the warehouse. One common error that warehouses often overlook is labeling the products. Putting labels on the products make it easier for pickers to choose the right inventory. Some simple preventative measures can save you from having to put out fires in the future.
You can use your own labeling system or purchase thermal printing labels to print them on. Improving the overall quality of operation will aid in the reduction of expenses. Collect data on error rates and set targets to reduce them.
Inbound Supply Chain
Making certain changes in the inbound supply chain can help you save a significant amount of money. These changes include scheduling inbound purchase orders to manage the receiving dock and yard better. Develop some vendor compliance policies in the inbound supply chain, such as purchasing terms and conditions, on-time delivery, quality and item specifications, product packaging, and labeling. This reduces labor for the rework of mistakes.
Environmental issues are always at the forefront which cannot be overlooked when organizing your warehouse. While organizing your warehouse, consider what materials you are using for any new construction and make sure your walls and ceilings provide adequate insulation. For lighting problems in a warehouse, try installing low energy lighting solutions, or allow your warehouse for maximum natural light.
Large windows or skylights can help you cut down on your energy use significantly. Also, make sure that the temperature and humidity are maintained properly in the warehouse as they are beneficial to the goods within the warehouse.
There are many warehouses that still rely on Excel sheets to manage operations. But Excel cannot save you as much money year after year as a good workforce program. So make sure you get rid of the paper and operate with real-time systems. Real-time systems help you gain visibility, obtain real-time operational status, and monitor labor productivity.
Reducing costs and saving money on warehouse management is all in your hands. If you know how efficiency can help you save money in your warehouse then there is nothing that can stop you from earning that extra profit which you always miss. Consider these practices mentioned above and you’ll definitely see the change in your costs.