Warehouse Improvements

Declining Business: 3 Key Ways to Save in Warehousing Costs

A financially stable business with declining demand is a situation in which. Do not be alarmed as there are many ways to help cut warehousing costs to prolong your positive cash flow. Here are 3 key ways:

1: Data-Driven Forecasting

Completely accurate forecasting is hard to achieve, but frequent, data-driven forecasts with informed strategic adjustments are the key to determine how much product nee on-hand inventory is needed. Being able to plan for While this seems basic, there are other areas where accurate forecast can help save money in the future. For example, if you are using a 3PL and can say that your inventory levels will drop x amount each year, your footprint in their warehouse should drop as well allowing the 3PL to fill that space with other clients thus saving you money.

2: Inventory Analysis

In a business that’s losing demand, there’s a good chance that the are certain items that maintain the demand while most others are being phased out. It is very important to keep track of the demand for each individual SKU in the warehouse. An ideal situation would be to set up all the slow-moving SKUs as direct shipments from the manufacturer while keeping only the high moving SKUs in the warehouse. While the shipment costs directly from manufacturer to customer will likely be higher, the savings from not keeping the inventory in stock will outweigh the increased shipping costs. Another option to look into would be to separate slow-moving SKUs in one smaller and centralized warehouse. You can keep the inventory levels low allowing you to lower the footprint. Staffing needs will also be reduced since the handling of these SKUs is much less than in the faster moving warehouse.

3: Inventory and Staffing Management

Proper inventory management is important for all businesses, but it is especially important in declining ones. Start by looking into any trends that might be developing in the orders. It is important to think of outside the box methods for optimizing your warehouse strategy. Instead of looking at storing the SKUs by size or product line, look to see if there are certain items that are usually part of the same order. Group these items close together in your warehouse to save on the handling costs. Instead of storing 1 small SKU per bin, store 3 in each by adding in dividers to the bins. There is also a greater need for cross training of the staff in a slower moving warehouse. There will be much more down time and you cannot afford to have employees not being productive. There will be a slight learning curve at the beginning when the employees are learning the other job functions of the warehouse, so productivity might go down. This is fine as the returns once the cross training is complete will be much greater than the lost production early on.

An Often-Overlooked Aspect of any Operation that can be Improved

As supply chain consultants, we are fortunate to be exposed to nearly every industry and have the unique opportunity to see hundreds of different warehousing and distribution operations. We get to see the different operations for exactly one reason: our clients want us to help improve them.

 

The most common item we recommend improving is the cleanliness and orderliness of a warehouse. Maintaining a clean and orderly operation is much more important than just the optics (though the optics are important - imagine taking a potential client or business partner through a dark warehouse with trash on the floor and graffiti on the wall!).

 

A clean and orderly operation drives the culture of accountability and effort. When nothing is disorganized or out of place, it makes it that much harder for someone to purposely misplace something or work inefficiently. When cleanliness is stressed, it follows to all aspects of the operation, from receiving to stretch-wrapping the pallet going out.

 

As simple as it sounds, this idea is not so simple to implement. Operators are typically evaluated on their productivity. The more you pick/put away accurately, the more productive you are. However, this leads to the little things being forgotten. Will an operator want to put an empty carton away in the corrugate bin if it slows them down? Probably not. These need to be taken into account when evaluating your warehouse personnel. Productivity is key, but not when it neglects other areas of the operation.