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How to Save Warehousing Costs

As the climate of uncertainty with the economy continues, costs for warehouse operations and distribution centers have risen steadily. Adjusting to these headwinds will be necessary for businesses to remain stable and maximize productivity.

Your warehouse plays a significant role for your business as it lies at the very center of your supply chain. By managing your warehouse efficiently, you can improve processes, increase productivity, and optimize your space. All of which help to manage costs. So, what strategies can be employed to mitigate warehouse costs, especially in uncertain times?

First and foremost, would be to understand your costs. It seems simple to say but in reality many warehouse operations have trouble understanding the underlying costs associated with their operations. This is backed by a McKinsey & Company article and report which cited that companies spent an estimated €300 billion on warehousing associated costs. The article went on to highlight that there was a significant opportunity for savings that could be achieved. Of course, this takes data to do. So how can your business generate and capture this data? One way is through a WMS, as it can capture and track the costs, especially underlying ones, associated to your inventory and warehouse. By reporting on the costs associated to your warehouse and inventory you can start to get a grasp on those underlying costs and analyze where savings can be achieved.

Once you have this type of actionable data on costs you can start to drill down into areas that can provide savings. One strategy is to optimize your storage efficiency. This would seem fairly straight forward but there is more to take into consideration than using your storage locations to capacity. For example, do you know which products have the quickest turnover? Storing them in easily accessible areas would potentially reduce fulfilment times. Or are there items that tend to be ordered together? It might make sense to strategically put in locations that are near each other to optimize picking. There are many storage related strategies to employ, from warehouse layout, storing by item types, demand, and so forth. All of which will save costs and can be implemented in the near term.

As we touched on, storage can help optimize picking, and this is our next cost saving suggestion. Picking has everything to do with your fulfilment and optimizing it can prove extremely cost effective. Think of simple things, like picking items correctly. If you have picking errors the best case scenario is that you realize the error before shipping and you assign a worker to return the item to storage. Worse case is that the item gets shipped and now you have added costs for return shipping, processing, materials, and so forth. In both scenarios time and money are lost. So how can we improve the situation? Mechanisms within the pick process like force scanning items and locations to confirm the item being picked help eliminate errors. As well, the pick process can become more efficient by implementing pick routes that guide workers through the warehouse. Depending on the size of the warehouse, bulk and zone picking can also be employed to reduce fulfilment times. By reducing errors and time spent picking productivity goes up which lowers costs across the board.

One thing that helps implement the above cost savings initiatives is modern technology. Implementing a system like a WMS helps to track warehouse activities, standardize processes, and accurately account for your inventory. In a previous article we touched on the fact that many warehouse operations still manage their inventory through spreadsheets, or do not track it at all. These strategies often have pitfalls where errors occur and time is wasted, resulting in either inventory being completely written off or lost. By implementing technology though you can begin to get a handle on your entire operation through effective reporting on your data. This will help optimize your processes (including those associated to the strategies we previously outlined) and find areas for improvement. Scanning technology will also create a mobile environment, saving time and helping avoid errors with picking and putaways. Furthermore, barcodes and labeling can be introduced for each item and location, creating a secure chain of custody. Implementing technology obviously has a cost in and of itself but the savings in time and literal costs are undeniable.

As we can see there are many options available to warehouses to manage costs, especially given the economic uncertainty being experienced. The ideas we’ve discussed are relatively basic in themselves and simply require some thought, planning, time, and a little investment. So, start small and work your way up. By implementing cost measures in one area, you can then use those found savings to expand your initiatives elsewhere as you continue to find new ways of working. Doing so will reap rewards now and further down the line and keep your business flourishing.

If you’re looking to manage warehouse costs by implementing a WMS get in contact with us by clicking the link below. We would be happy to speak with you.


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