15 Ways to Reduce Warehouse Expenses
At the recent National Conference on Operations & Fulfillment in Las Vegas, Curt Barry, president of the Richmond, Va.-based multichannel operations and fulfillment consultancy F. Curtis Barry & Co., presented 15 tips on how to reduce expenses in the warehouse. Here's a rundown of his presentation:
1. Efficient receiving. Inventory accuracy and product flow through the warehouse all start with receiving. Often the biggest improvement companies can make is to develop and implement vendor compliance policies, Barry said.
2. Reduce inbound and outbound freight. Outbound freight now exceeds direct labor in many distribution centers. Don’t be too proud to ask consultants to help negotiate new contracts, even if it’s on a gain share basis. Too many dollars are at stake.
3. Dock to stock put away of product. Reduce warehouse back orders and “can-not-finds,” Barry noted during his presentation. This may cost anywhere from 20 minutes to 60 minutes to resolve.
4. Slotting. Efficiency techniques include “hot-pick areas” for fast-selling products. The old 80/20 rule holds for product sales.
5. Order picking. Reduce the picking time — 70 percent of which is spent walking in the warehouse — by using the proper approach to fit your business (e.g., singles, cart/bin, batch pick and sort, zone pick, etc.), Barry pointed out. In many businesses, singles account for more than 50 percent of the pick volume.
6. Reduce the number of replenishments. Hold the equivalent of a week’s unit volume in the forward pick.
7. Packing. Picking and packing amount to more than 50 percent of direct labor costs in the warehouse. Put packing supplies adjacent to the stations, and ensure you have the proper number of insert compartments, sufficient tabletop square footage and adjustable length stations, Barry said.
8. Returns processing. Returns cost more than orders. Eliminate the controllable reasons for returns — picking errors, copy and art errors, among others. Streamline the receiving process to get returns processed efficiently and refunds back to customers quickly.
9. Inventory control. Inventory is the largest balance sheet asset in most businesses, Barry reminded attendees. Without accurate inventory, you can’t have sales or move orders efficiently in the distribution center. Use aisle mapping (proper location of product without counting) frequently.
10. Barcode scanning. This may be the most underused technology in our industry, Barry said. Maximize its use from dock receiving to put away to picking, pack confirmation, shipping, returns processing, inventory control and cycle counting. Speed up product and order flow through the center. Increase inventory accuracy to 99.9 percent.
11. Effective warehouse layout. Look to increase capacity within the same facility, and streamline product and order flow, Barry said.
12. Work standards and measurements. You can’t improve that which you haven’t measured. Apply benchmarking principles to set up internal benchmarks. Use external benchmarking to understand what other companies achieve and for best practice ideas.
13. Management of labor. Labor accounts for more than 50 percent of the cost per order for call centers and warehouses.
14. Develop a world-class team. There are 11 key issues you need to resolve, including staff empowerment, delegation, hiring competent people, recruiting, training the person who will eventually take your place and more.
15. Use third-party logistics. Barry noted that his clients have used third-party logistics more in the last two years than in the prior 10. Internal costs have increased to the point where, for many companies, on a total cost-per-order basis, it’s cheaper to use third-party logistics. Additionally, companies avoid having to invest in infrastructure such as warehouses and systems, and have reduced management of fulfillment, call center and IT. Companies instead can concentrate on the critical areas of marketing and merchandising.