- \n
- Optimization of warehouse storage can significantly increase productivity and performance.<\/li>\n
- Offering customers a variety of pickup and delivery options can reduce warehouse costs while expanding product visibility.<\/li>\n
- Implementing an efficient pick and pack routes system can notably reduce warehouse labor costs.<\/li>\n
- Upgrading to modern mobile technology in the warehouse can improve efficiency and order handling speed, leading to cost savings.<\/li>\n
- Regular auditing and standardizing workflows ensure consistency and optimal performance among employees.<\/li>\n<\/ul>\n
There\u2019s a positive link between customer retention and warehouse efficiency. When your warehouse efficiency slips, your customer retention rate will reflect that. When your customers choose to go with your competitor who delivers product faster, your bottom line will take a hit.<\/p>\n
<\/p>\n
Inefficient warehouse operations can lead to long waits and inconveniences, which are the top reasons customers will stop buying from you<\/a>. Inefficient operations also lead to wasted labor. Wasted motion in a U.S. warehouse averages about 6.9 weeks per year<\/a>. How much better would your warehouse run if you had nearly 7 extra weeks of labor time?<\/p>\n
While you may not have the budget to fully automate your warehouse<\/a>, there are a number of things you can do to improve efficiency and reduce operating costs.<\/p>\n
\nHere are nine ways to improve warehouse efficiency and reduce operating costs in the long term:<\/p>\n
- \n
- Optimize Warehouse Storage<\/a><\/li>\n
- Give Customers More Pickup and Delivery Options<\/a><\/li>\n
- Improve Pick and Pack Routes in Your Warehouse<\/a><\/li>\n
- Upgrade Mobile Technology In Your Warehouse<\/a><\/li>\n
- Create an Inventory Review Process<\/a><\/li>\n
- Review Product Replenishment Practices<\/a><\/li>\n
- Audit Packaging for Products and Shipment<\/a><\/li>\n
- Standardize and Audit Your Workflows<\/a><\/li>\n
- Consider Automation in the Picking Process<\/a><\/li>\n<\/ol>\n<\/div>\n
9 Ways to Improve Warehouse Efficiency and Operations<\/h2>\n
1. Optimize Warehouse Storage<\/h3>\n
More consumers are shopping online, which means a greater demand for suppliers and a growing need to expand inventory. In addition, a 2018 study shows that customers are demanding more personalization and customization options in the products they buy.<\/p>\n
More product variants mean increased inventory as more SKUs<\/a> are added to your warehouse. While warehouse square footage space doesn\u2019t cost as much as other commercial property, it\u2019s not always easy to expand.<\/p>\n
Setting up a second fulfillment location or expanding an existing one can be costly. We found estimates in a wide range. Some as low as $10,000,<\/a> and others over $300,000<\/a>. Where you\u2019re opening your new location factors in heavily to the price.<\/p>\n
Instead, you should first optimize the space you have. Build storage upward and see if you can add extra storage aisles by minimizing the distance between aisles. One way to do this is to create alternating one-way aisles instead of two-way traffic aisles.<\/p>\n
In addition to getting more storage from your warehouse space, this can greatly improve the efficiency of stow and pick:<\/p>\n
- \n
- Equipment handlers can access the aisle on either side of the aisle while picking or stowing<\/li>\n
- Minimizes equipment collisions with one-way traffic<\/li>\n
- Minimize travel time from aisle to aisle<\/li>\n
- Improves warehouse safety<\/a> by eliminating the need for employees to exit equipment<\/li>\n<\/ul>\n
In 2016, Johnson Controls used logistics software when optimizing a new warehouse. The logistics simulation software helped the company design the most efficient warehouse layout<\/a> and operation of the new space and improved picking capacity by 30%.<\/p>\n
Optimizing the design and flow of your warehouse can significantly increase storage as well as productivity and performance. Most small businesses don\u2019t have the capital to sink into costly warehouse planning systems. However, you can optimize your warehouse space and performance with a pen, some paper, and some time to look at your warehouse in a new way. We wrote an entire guide on the process, which you can read by clicking here.<\/p>\n
<\/p>\n
BONUS:<\/strong> Before you read further, download our Warehouse Management Guide Whitepaper<\/a> to see how Logiwa uses real-time data to increase warehouse efficiency and reduce costs.\u00a0Our customers get up to 100% inventory accuracy and double their shipment numbers.<\/p>\n
2. Give Customers More Pickup and Delivery Options<\/h3>\n
You can reduce warehouse operating costs and shift the burden of inventory by moving products downstream to retailers.<\/p>\n
Major retailers have started shifting the burden of inventory to retail outlets. Target, for example, revealed that 15% of its online purchases are marked for pick up in-store<\/a>. If you have retail locations that can provide fulfillment then allow your customers to do local pick up.<\/p>\n
For online retailers without brick-and-mortar locations, consider Amazon. Amazon Fulfillment allows suppliers and retailers to sell their products on the marketplace with product stored and fulfilled by Amazon\u2019s own warehouse facilities<\/a>.<\/p>\n
Amazon has also introduced their own version of buy online, pick up in-store. Customers can now purchase products and arrange to pick them up at an Amazon Locker. Once they receive a pick-up code, customers have three days to pick up their package.<\/p>\n
Cards Against Humanity<\/a> reviewed a lot of ways to ship its product, which became a viral sensation when it\u2019s Kickstarter exploded. They opted for Amazon Fulfillment over having their own warehouse busting at the seams with product. It was a smart choice since Amazon Fulfillment meant Amazon covered shipping costs<\/a> and they handled all customer service issues related to shipping.<\/p>\n
Not only does this reduce warehouse costs but it also expands product visibility, as Cards Against Humanity moves upwards of 120,000 units each month for over $1.5 million in sales.<\/p>\n
3. Improve Pick and Pack Routes in Your Warehouse<\/h3>\n
One of the biggest resource consumers in warehouses is the amount of time spent by pickers moving between orders and locating product to be picked.<\/p>\n
In fact, labor constitutes about 65% of the operating budget<\/a> for the average warehouse and studies show that order picking counts for roughly 60% of a warehouse\u2019s labor cost<\/a>.<\/p>\n
You can reduce a good chunk of that overhead cost by implementing a supply chain management system<\/a>. When implemented, this system records all product data and its location in the warehouse. As your warehouse receives products, the system will direct where those products are placed.<\/p>\n
In addition, a good order fulfillment system will optimize the walking path for pickers<\/a>. Based on product variables and incoming orders, the system will provide pickers with an optimal route through the warehouse from product to product. This greatly reduces the time spent walking and searching for product which is a drain on budget as well as employee energy.<\/p>\n
<\/p>\n
Order Picking Guide:<\/strong> Order picking accounts for 60% of your warehouse operational costs. Download our guide where we compare the 3 most common order picking methods and find out which method increased productivity by 50%.<\/a><\/p>\n
4. Upgrade Mobile Technology In Your Warehouse<\/h3>\n
Most businesses understand that technology can improve efficiency and increase order handling speed. That all equates to cost savings, but only if you\u2019re using the right equipment that\u2019s up to date. 67% of warehouses plan to use mobile devices to manage inventory in the future.<\/a><\/p>\n
And that\u2019s a smart investment.<\/p>\n
Most people think of barcode scanners when they picture warehouse mobile devices. However, your employees can also use smartphones and tablets loaded with a system, like Logiwa, to receive pick orders and optimal picking routes. Thanks to WiFi, they can be anywhere in your warehouse and receive the order.<\/p>\n
Ergonomically designed handheld devices may have a leg up on other mobile devices. Besides helping your employees avoid injury, they can perform many of the same functions. They also come equipped with RFID scanners<\/a>, cameras, and touchscreens.<\/p>\n
Upgrading technology, including mobile systems and the use of pick-to-light, RFID, and pick-to-voice tech, reduces picking error rates by 67%<\/a> compared to aging manual methods. That\u2019s a significant cost savings when you calculate the costs associated with processing order returns, shipping costs, labor-related to customer experience<\/a>, customer credits, and more.<\/p>\n
5. Create an Inventory Review Process<\/h3>\n
We may be getting products out to customers more efficiently than ever before, but that\u2019s not reducing the amount of time product lingers in your warehouse. According to Supply Chain Digest, companies are still holding on to more inventory \u2013 likely related to the increase in the number of SKUs being stocked each day.<\/p>\n
The amount of inventory on hand based on an average sales day has risen by 8.3% over the last 5 years<\/a>.<\/p>\n
This is where you need to use data to review your inventory because dead inventory filling your warehouse costs you money.<\/p>\n
Optimize your inventory by looking at metrics. Audit your inventory and identify the inventory that\u2019s not moving. Metrics to monitor include:<\/p>\n
- \n
- Average days to sell inventory<\/li>\n
- The inventory turnover rate<\/a> of products<\/li>\n
- The return on investment and how it diminishes based on how long you hold the product<\/li>\n
- Gross profit of products (price minus cost to make, hold, and sell the product)<\/li>\n<\/ul>\n
Holding inventory for too long eats at profit margins and costs you money. Find a way to move those products and\/or eliminate them from your inventory.<\/p>\n
6. Review Product Replenishment Practices<\/h3>\n
As warehouse operations grow, it\u2019s common for a company to hire a full-time inventory controller. This individual is in charge of monitoring inventory levels and handling reorders<\/a> to maintain stock.<\/p>\n
Unfortunately, human error plagues manual replenishment practices. Inefficient stock replenishment<\/a> can cost you in two ways:<\/p>\n
- \n
- Overstocking inventory that doesn\u2019t move<\/li>\n
- Understocking inventory resulting in out-of-stock, backorder<\/a> and lost customers<\/li>\n<\/ul>\n
Warehouse management systems can help automate some or all of this process. By setting periodic automatic replenishment levels in your inventory, you can create triggers for low inventory to ensure more product is ordered. You can also set a maximum inventory cap to reduce the chance of having too much product on hand.<\/p>\n
7. Audit Packaging for Products and Shipment<\/h3>\n
There\u2019s a lot of waste in order fulfillment and it\u2019s not just in the shipping supplies. When you\u2019re dealing with various products, many teams have to prep products for shipping. Specific packaging and even packaging removal might be involved in this process.<\/p>\n
Amazon saw multiple opportunities to make packaging more efficient and create a friendly experience for customers. It\u2019s Frustration Free Packaging Program<\/a> requires products using Amazon Fulfillment to have certified packaging. This means the package requires no additional shipping prep or an overbox to be applied.<\/p>\n
The company has already reduced waste over the last 10 years. This includes eliminating more than 500 million boxes and over 240,000 tons of packaging materials.<\/p>\n
Review your packaging operations and find ways to reduce the number of boxes, size of boxes, and the materials used to package individual products for sale. See if you can work with the suppliers in your supply chain to create a greener packaging process.<\/p>\n
Reviewing the packaging process can ensure teams are using too much material which inflates the costs of shipping<\/a> and handling.<\/p>\n
Likewise, you want to make sure your teams aren\u2019t using too little or inappropriate packaging materials which can lead to product damage, customer returns, and lost business.<\/p>\n
<\/p>\n
Learn how crucial is to select the right package type<\/a> for your online orders.<\/strong><\/p>\n
![\"warehouse-efficiency-image-2-730x487-tinified\"](\"https:\/\/f.hubspotusercontent30.net\/hubfs\/3469233\/Images\/Emails\/Blog\/warehouse-efficiency-image-2-730x487-tinified.jpg\")
<\/h3>\n8. Standardize and Audit Your Workflows<\/h3>\n
From the time a product arrives in your warehouse to the point where it leaves, every activity and process for moving that product should have an established workflow. Without a workflow in place, employees either work in a way that is most efficient for them or most comfortable.<\/p>\n
What\u2019s efficient or comfortable for the employee may not be the most efficient or profitable way for the company.<\/p>\n
With automated warehouse workflows<\/a>, you can ensure that every employee operates within the same standards. Most importantly, you can monitor individual employee performance against benchmarks established for that segment of the workflow.<\/p>\n
When fulfillment issues<\/a> arise that can impact operational costs, a quick audit can typically reveal the workflow bottleneck. If it\u2019s a performance issue, management can work with the employee to quickly correct the deviation and restore the workflow.<\/p>\n
One case shared by Inbound Logistics<\/a> showed how an employee responsible for unloading trailers was struggling to hit productivity goals within his area. When management personally reviewed the employee\u2019s performance, they discovered the employee had added a step in the unloading process. After identifying and correcting the problem, the employee easily hit the established performance goal and productivity was restored.<\/p>\n
Before you audit and change any workflows in your warehouse, remember that your employees the heart of that process.<\/p>\n
Workflows rely on people, not only to complete the task but also to improve them and make your warehouse more efficient. Turn to your staff when you want to optimize workflow efficiency. Create a feedback loop and allow your employees to show you ways they feel each task can be improved.<\/p>\n
Some measurements will be required, but even seemingly simple improvements in the packaging and material handling<\/a> process can reduce a significant amount of waste and lost revenue.<\/p>\n
9. Consider Automation in the Picking Process<\/h3>\n
As your business grows you may need to reconsider the picking process within your warehouse. Smaller operations can function well enough with manual pickers delivering products to the packaging and the shipment side of your facility. This approach isn\u2019t scalable and will begin to impact productivity.<\/p>\n
For example, the average order picker can pick between 60 and 80 products per hour when routes are optimized in your warehouse. This pick rate can be improved to as much as 300 pieces per hour<\/a> when utilizing sorters and conveyors that can move product through the facility.<\/p>\n
Of course, there is a cost involved with upgrading and adding automation. However, by reducing travel time, you can dramatically increase the order picking productivity<\/a> of your fulfillment center and ultimately reduce costs.<\/p>\n
Every Warehouse Has the Opportunity to Improve Efficiency and Reduce Costs<\/h2>\n
The above recommendations can each help improve the efficiency of your warehouse, and many revolve around leveraging a 3PL Software<\/a> or a WMS Software<\/a>. An audit of your operations can help you determine bottlenecks and find opportunities to improve warehouse efficiency. Just remember that a single audit will likely reveal some cost-cutting measures, but not all of them.<\/p>\n
The best approach is to implement a warehouse management system and continually monitor KPIs and performance. Over time, each change you make will continue to reduce costs and innovate your warehouse operations.<\/p>\n
- Give Customers More Pickup and Delivery Options<\/a><\/li>\n
- Optimize Warehouse Storage<\/a><\/li>\n