Owning and managing a warehouse can be costly, especially as expenses can accumulate over the years. If you’re looking for options and help with lowering overhead and making your warehouse more efficient, you’re in the right place. There are several factors you can consider to help lower the overall costs of your warehouse. Outlined below are a few of the major variables to assess and apply to your company and storage operations.
Even if you think your company is already efficient, reviewing the areas below may be able to help you run a warehouse with lower costs.
Labor
Labor costs often account for the leading expense in warehousing. One way to decrease labor costs is to recognize exceptional employees reassess current labor needs. Even when it comes to the highest performing employees, it may be an advantage to invest in new training to ensure all employees have the resources to needed to follow company standards and safety rules, and perform at their best. In some situations, this can include evaluating individual productivity. Another approach, though sometimes controversial, is implementing certain automated labor systems that eliminate the need for employees to complete tasks.
Inventory
Another important way to potentially decrease costs is by eliminating any excess inventory. Holding overstock in your warehouse can cost you in a number of ways. It makes your warehouse less efficient, and the money used to purchase the excess product could’ve been allocated towards higher selling ones.
One way of getting rid of this excess inventory is to store only the most important items. An analogy used from sparefoot.com is that you wouldn’t own a safety deposit box and fill it with worthless items. Another method of removing excess inventory is by implementing cross docking. This process reduces inventory and holding costs by shipping items to consumers and retailers as they arrive rather than storing them in the warehouse, allowing the warehouse to steer clear of holding costs. This can also boost customer satisfaction by allowing quick shipping times and order fulfillment. See Pallet Rack Now’s “Modern Rules of Warehouse Maximization” article for more tips on warehouse maximization and how to manage your inventory.
Operations
Your warehouse operations might be costing you more than you think. One way to audit your operations is to evaluate workflow. By optimizing your workflow, you can determine whether or not your processes are serving your goals and priorities in the most efficient way possible. One simple way to optimize workflow is to make housekeeping of the warehouse a top priority. In a clean, organized warehouse, workers are able to do what needs to be done without second guessing or navigating a messy environment. This can also mean changing, or at least optimizing your warehouse layout to best fit your inventory and storage needs. If you have a large warehouse that has a layout that isn’t optimized well, there is an increased risk of excess travel time for order pickers moving between products. Though a seemingly small factor, this increase in travel time can cause a massive dent in your bottom line over time, costing you equipment fuel, labor hours and opportunity cost.
Technology
In today’s warehouse environment, technology is an important and sometimes crucial part of leading companies. However, if you’re using it the wrong way it can hurt more than help. One of the first variables to audit when assessing technology costs is electricity usage. Electricity is all around us and there are many viable options for switching over to more energy efficient lighting that can save you a surprising amount of money over time. It’s also possible to cut costs by investing in automated timers that ensure no electricity is being used when it isn’t needed. Yet another option is to look into energy-efficient forklift chargers that are now on the market.
Reviewing your current software programs can also beneficial in helping you critique how the software helps or hinders your company. If you have a very basic software that isn’t put to good use, then you may want to consider purchasing a new one to save you time and automate your process auditing.
Equipment
The equipment needed to properly run a warehouse usually isn’t cheap. The lift trucks and other machinery used in warehouses are expensive assets that should be considered in terms of how they’re used. It’s crucial to optimize the machinery’s use by carefully monitoring its actual use compared to its need in order to avoid unnecessary fuel costs.
Further looking into fuel costs, one solution is to switch to electric equipment if you’re currently using propane fuel. Electricity is up to 10X cheaper as a fuel source. Another idea for cutting your equipment costs is to consider short-term rentals, or leasing your machinery rather than buying it. One of the downfalls warehouse managers and owners come across is having equipment/machinery that isn’t put to good use, or used at all. Renting or leasing equipment can mean only paying for equipment when it needs to be used, avoiding added fuel costs, and saving space.
There are a lot of cost variables that come along with owning or managing a warehouse. The most important thing to remember is that the more efficient your warehouse is, the more money you’ll likely save over the long run. There are also a lot of unnecessary costs warehouse managers tend to pay when it comes to their warehouse. Fortunately, there are often ways of avoiding these risks before they wreak havoc on a company’s bottom line. In terms of the warehouse as a whole, it’s important to maintain the storage conditions. Although you can’t control the weather, you can control what happens to your inventory. By keeping your storage area sheltered and maintaining a healthy temperature and humidity, you can easily avoid a lot of potential damage. Of course, be sure to continuously analyze key components of your warehouse to look for ways of improving.
Additional Resources:
http://www.fcbco.com/services/warehouse-strategies
http://www.warehouseiq.com/strategies-to-reduce-warehousing-costs/
