15 Easy Ways to Increase Warehouse Efficiency and Cut Costs
There is a positive relationship between customer retention and warehouse efficiency. When your warehouse efficiency deteriorates, your customer retention will reflect that. When your customers choose to go with your competitor who delivers products faster, your profit will be a hit.
Inefficient warehouse operations can lead to long waiting times and inconveniences, which are the main reasons why customers stop buying from you. Inefficient operations also lead to wasted labor. Wasted movement in a US warehouse averages about 6.9 weeks per year. How much better would your warehouse perform if you had almost 7 weeks extra working time?
While you may not have the budget to fully automate your warehouse, there are a number of things you can do to improve efficiency and reduce operating costs.
Most warehouses have an ongoing mission to maximize the productivity process by optimizing workflows, automating processes, and reducing waste (both time and resources). Warehouses are complex operations, with many moving parts and functions occurring simultaneously, so while there are many areas for improving productivity, it's not always easy to determine where the results will work.
Advances in logistics technology, such as automated robots, have a major impact on warehouse productivity, along with innovative artificial intelligence and machine learning solutions, advanced warehouse management software and other technological solutions. By reviewing your current processes and systems to identify bottlenecks and other issues, implement process improvements, and invest in smart technologies that meet key challenges, improving warehouse productivity is at your fingertips.
To help you evaluate your current systems and find opportunities for improvement, we've compiled 15 expert tips to improve your warehouse efficiency and productivity, from management and leadership tips to tips to improve your warehouse layout and workflows.
1. Enter the incentive payment.
“Well-designed performance incentive payments can deliver the greatest percentage improvement in labor productivity. Over 50% of the workforce in the warehouse is at work, so start there. You should always make sure you're not paying for productivity. you already get or can get it in other ways.
2. Invest in quality training processes.
"Hiring quality people is just the beginning. To keep them on track and help them grow, you need to emphasize training. Training sessions should be conducted regularly in short 45-60 minute increments. Where possible, they should be are greeted by direct supervisors and should adopt a more conversational tone than a conference tone.
3. Make safety a priority.
"Safety should be a priority in your warehouse because without smart safety practices you will face hazards and accidents that lead to inefficiencies and lost profits. Demolition safety can save you money up front, but accidents are incredibly expensive."
4. Develop effective leadership on the front lines.
"The best managers are leaders who closely monitor, plan and manage all aspects of performance. They are constantly developing their skills to quickly recognize and address new problems. They will be more effective in improving warehouse efficiency.
5. Create a culture that fosters productivity.
“The culture you create determines all aspects of your company's performance, and you need to find a warehouse culture that is interesting, creative and fun. In addition to asking your employees for new ideas, create additional ways for them to be involved in your work. Monthly competitions, corporate events and other concepts that create a more interesting and enjoyable environment will only have a positive impact on your warehouse.
6. Listen to employees.
They have valuable insight into process flaws and other productivity delays. “You can use the advice of your employees to improve the efficiency of your warehouse”.
Warehouse workers are the one who immediately knows the strengths and weaknesses of your warehouse management system. Therefore, you can save yourself time to listen to the advice of the warehouse personnel as they are the ones who identify and fix the problem directly from the warehouse.
7. Optimize warehouse storage
More consumers are shopping online, which means greater demand for suppliers and a growing need to expand inventory. Additionally, Studies shows that customers are demanding more personalization and customization options for the products they buy.
More product variants mean more inventory as more SKUs are added to your warehouse. While warehouse square footage is not as expensive as other commercial properties, it is not always easy to expand.
Setting up a second fulfillment location or expanding an existing one can be expensive. We found estimates in a wide range. Some as low as $ 10,000, and others over $ 300,000. Where you open your new location has a big impact on the price.
Instead, you need to optimize the space you have first. Build storage space upstairs and see if you can add additional storage aisles by minimizing the distance between the aisles. One way to do this is to create alternating one-way aisles instead of two-way aisles.
In addition to getting more storage space from your warehouse space, this can significantly improve stow and pick efficiency:
• Equipment handlers can access the aisle on either side of the aisle during picking or stowage
• Minimizes collisions with one-way equipment
• Minimize travel time from aisle to aisle
• Improves warehouse safety by eliminating the need for workers to leave equipment
By optimizing the design and flow of your warehouse, you can significantly improve storage, productivity and performance. Most small businesses don't have the capital to get into expensive 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've written a full guide on the process, which you can read by clicking here.
8. Give customers more collection and delivery options
You can reduce warehouse costs and shift inventory load by moving the product downstream to retailers.
Major retailers have started shifting the inventory load to outlets. For example, Target revealed that 15% of its online purchases are marked for in-store pickup. If you have retail locations that can handle fulfillment, allow your customers to pick up locally.
Consider Amazon for online retailers without physical locations. Amazon Fulfillment allows suppliers and retailers to sell their products in the market while the product is stored and fulfilled by Amazon's own warehouse facilities.
Amazon has also introduced its own version of buy online, pick up in store. Customers can now purchase and collect products from an Amazon Locker. Once they have received a pick-up code, customers have three days to pick up their package.
Cards Against Humanity discussed many ways to ship its product, which became a viral sensation when Kickstarter exploded. They chose Amazon Fulfillment instead of their own warehouse bursting at the seams with the product. It was a smart choice as Amazon Fulfillment meant Amazon covered the shipping costs and handled all customer service issues related to shipping services.
Not only does this reduce warehouse costs, but it also increases product visibility as Cards Against Humanity goes up 120,000 units every month for sales in excess of $ 1.5 million.
9. Improve the collection and storage routes in your warehouse
One of the most important uses of resources in warehouses is the amount of time that order pickers spend between orders and locating the product to be picked.
In fact, labor represents about 65% of the average warehouse's operating budget, and studies show that order picking accounts for about 60% of a warehouse's labor cost.
You can reduce much of those overhead by implementing a warehouse management system. After implementation, this system records all product data and its location in the warehouse. As your warehouse receives products, the system will tell you where those products will be placed.
Additionally, a good warehouse management system optimizes the gateway for collectors. Based on product variables and incoming orders, the system offers pickers an optimal route through the warehouse from one product to another. This reduces the time it takes to walk around and search for a product, reducing both budget and employee energy.
10. Upgrade mobile technology in your warehouse
Most companies understand that technology can improve efficiency and speed order fulfillment. All of that adds up to cost savings, but only if you use the right equipment that is up to date. 67% of warehouses plan to use mobile devices to manage inventory in the future.
And that's a smart investment.
Most people think of barcode scanners when they envision mobile devices in a warehouse. However, your employees can also use smartphones and tablets loaded with WMS software, such as Logiwa, to receive pickup orders and optimal pickup routes. Thanks to WiFi, they can be anywhere in your warehouse and receive the order.
Ergonomically designed handheld devices can be ahead of other mobile devices. In addition to helping your employees avoid injury, they can perform many of the same functions. They are also equipped with RFID scanners, cameras and touch screens.
Upgrade technology, including mobile systems and the use of pick-to-light, RFID, and pick-to-voice technology, reduces pick-to-voice errors by 67% compared to legacy manual methods. That's a significant cost savings when you calculate costs associated with processing order returns, shipping costs, labor costs related to customer experience, customer credits, and more.
11. Create an inventory assessment process
We may be delivering products to customers more efficiently than ever, but that does not reduce the time the product stays in your warehouse. According to Supply Chain Digest, companies still have more inventory, probably related to the increase in the number of SKUs being stocked every day.
The amount of on-hand inventory based on an average day of sale has increased by 8.3% over the last 5 years.
This is where you should use the data to review your inventory, as the dead inventory that fills your warehouse will cost you money.
Optimize your stock by observing the statistics. Check your inventory and identify inventory that is not moving. Metrics to check include:
• Average number of days to sell inventory
• The turnover rate of the stock of products.
• Return on investment and how it decreases depending on how long you keep the product.
• Gross profit of the products (price less costs to manufacture, maintain and sell the product)
If you hold inventory for too long, it eats up your profit margins and costs you money. Find a way to move and / or remove those products from your inventory.
12. Review inventory replenishment practices.
As warehouse operations increase, it is common for a business to hire a full-time inventory manager. This person is responsible for monitoring inventory levels and handling backorders to maintain inventory levels.
Unfortunately, human error affects manual replenishment. Inefficient inventory replenishment can cost you in two ways:
• Too many stocks not moving
• Too few stocks, which means stocks are out of stock and customers are lost.
Warehouse management systems can help automate part or all of the process. By setting periodic auto-replenishment levels on your inventory, you can create low inventory triggers to ensure more products are ordered. You can also set a maximum inventory limit to reduce the chances of having too many products on hand.
13. Audit product packaging and shipping.
There's a lot of waste in order fulfillment, and not just shipping supplies. For different products, many teams have to prepare the products for shipment. This process can involve specific packaging and even removal of the packaging.
Amazon saw multiple opportunities to make packaging more efficient and create a customer-friendly experience. The Frustration Free Packaging Program requires that products using Amazon Fulfillment have certified packaging. This means that the package does not require additional shipping preparation or an outer box.
The company has already reduced waste for the past 10 years. This includes eliminating more than 500 million boxes and more than 240,000 tons of packaging.
Review your packaging operations and look for ways to reduce the number of boxes, box sizes, and materials used to package individual products for sale. See if you can work with suppliers in your supply chain to create a greener packaging process.
Reviewing the packaging process can cause teams to use too much material, increasing shipping and handling costs.
Similarly, you need to ensure that your teams do not use insufficient or insufficient packaging materials, which can lead to product damage, customer returns, and lost customers.
14. Standardize and monitor your workflows
From the moment a product arrives in your warehouse to the point where it leaves, every activity and process to move that product must have an established workflow. Without an existing workflow, employees work in the most efficient or comfortable way for them.
What is efficient or comfortable for the employee may not be the most efficient or profitable for the company.
With automated workflows, you can ensure that all employees work to the same standards. Most importantly, you can track the performance of individual employees against the benchmarks set for that segment of the workflow.
When execution issues arise that could affect operational costs, a quick audit can usually reveal the bottleneck in the workflow. If it is a performance issue, management can work with the employee to quickly correct the deviation and restore work flow.
A case shared by Inbound Logistics showed how an employee responsible for unloading trailers struggled to meet productivity goals within his area. When management personally evaluated the employee's performance, they found that the employee had added a step in the download process. Once the problem was identified and fixed, the employee easily reached the set performance goal and productivity was restored.
Before reviewing and changing workflows in your warehouse, keep in mind that your employees are at the heart of that process.
Workflows depend on people not only to complete the task, but also to improve them and make your warehouse more efficient. Get your staff involved if you want to optimize workflow efficiency. Create a feedback loop and let your employees show you how they think each task can be improved.
Some measurements are required, but even seemingly simple improvements to the packaging and material handling process can reduce a significant amount of waste and lost revenue.
15. Consider automation in the order picking process.
As your business grows, you may need to rethink the picking process within your warehouse. Smaller operations can do well enough with hand pickers that deliver products to the package and shipment side of their facility. This approach is not scalable and will affect productivity.
For example, the average order picker can choose between 60 and 80 products per hour when the routes in their warehouse are optimized. This collection speed can be improved up to 300 pieces per hour by using classifiers and conveyors that can move product around the facility.
Of course, there are costs associated with upgrading and adding automation. By reducing travel time, you can dramatically increase your fulfillment center's picking productivity and ultimately reduce costs.
Each upgrade offers the opportunity to reduce operating costs
Each of the above recommendations can help improve your warehouse efficiency. An audit of your operations can help you identify bottlenecks and identify opportunities to improve your warehouse efficiency. Keep in mind that a single audit will likely reveal some, but not all, cost reduction measures.
The best approach is to implement a warehouse management system and continually monitor KPIs and performance. Any changes you make will continue to reduce costs over time and continue to innovate your warehouse operations.