5 Tips for Better Warehouse Profitability

A quick look around may yield some valuable clues.  While some of these issues may be easily fixed, others may benefit from assistance from technology, a knowledgeable consultant or other means.

1. Update your standardized processes

Did you know that in the past 3 to 5 years the supply chain industry has changed more than it has in 20 years?  Knowing that this is the case, it probably seems sensible to look at the standard processes you are using in your warehouse today.  Your clients’ operations are not the same.  Why would you think that yours would be?

Examine, test and adjust your standard processes.  If you are still using the same processes from years ago, it is likely that they were developed using information and standards that may now be obsolete.

Standard processes are important because the enforce safety and security in the warehouse/distribution center environment.  Also essential for providing a baseline against which improvements can be measured, having standard processes in place in your warehouse helps to simplify the onboarding and training of new team members.

With the high rate of employee turnover in the warehouse and typical need for seasonal workers, relying on standard practices can help to speed up the training and ensure that you workforce is performing work in a consistent manner.

2. Get rid of excessive inventory in your warehouse

Suffering from inventory management blues?  Whether you are operating a 3PL or warehouse distribution center business, having excessive inventory in your warehouse can be a drain on your company’s profitability.  Having excess inventory is a common problem with wholesalers as they tend to make large purchases of a single product to obtain bulk quantity discounts.  Storing an excess of inventory is one of the most common warehousing mistakes made by supply chain businesses.

Why does having excess inventory in your supply chain warehouse matter? Excess inventory ties up money.  One way of reducing excess inventory is to have larger orders delivered in smaller batches.  Take advantage of this time to re-evaluate your warehouse layout and space utilization and improve warehouse productivity and inventory control. It’s a new year, make every square foot of warehouse space pay off for your business.

3. Measure warehouse labor costs to find clues to inefficiencies

Labor is typically the highest single cost in warehouse operations and can account for as much as 50% of total operating cost.  While some companies try to track labor costs manually with spreadsheets and time cards, these methods do not produce a real time, accurate understanding of the task workload or provide insight into inefficiencies in the operation.

Using a labor management system or warehouse management system with labor management functionality enables warehouse and 3PL executives to locate inefficiencies in labor so that they can be corrected.  Being able to look at system reports or a dashboard on labor management often makes the inefficiencies easy to spot.

Data is collected and measured by which warehouse worker accomplishes the task, type of work and cost of the task.  Using labor management software enables you to obtain a clearer picture of the workload, labor resources and other metrics to make sure your workforce is “working smart” to maximize your profitability.

Being able to optimize labor productivity and keep costs down will provide your supply chain company with a valuable competitive advantage.  All it takes is data (for performance measures) a labor management system and a skilled, experienced warehouse manager or supply chain executive.  Executive education helpful, but not required.

4. Make sure that all warehouse workers receive adequate technology training

Yes, you have the tools, but do your warehouse workers really understand and know how to use them properly?

Just because most people use Smartphones these days does not mean that they know how to properly use a barcode reader, mobile computer device or tablet.  Not everyone is comfortable with using supply chain technologies.  As a provider of supply chain technologies, we often find that many warehouse workers are afraid to ask questions, are fearful of change or using new technology or do not have solid knowledge of terminology.

Hardware and software technology providers often have specialized expertise in conducting training but need your help to ensure successful training sessions.  By fostering a spirit of willingness and acceptance that technology will be used to improve the quality of the work experience, data collected and service to your customers, your labor resources should gradually accept your company’s decision to utilize more technology in operations.

Having the ability to conduct training in multiple ways can be quite impactful. 

Look for hands on training that can be done either online or in person and an online learning system.  It also is optimal if you are able to record online training sessions for playback at a future time in case new warehouse workers are hired.  This can be especially helpful in reducing overall training costs for third party logistics and other supply chain businesses who face high turnover or that are dealing with a large quantity of seasonal workers.

5. Reduce the amount obsolete inventory in your warehouse

Think of your warehouse as real estate.  Nearly every inch of your warehouse facility has the potential to help generate revenue if used appropriately.  When inventory does not move and remains in the warehouse for an extended period of time, it not only eliminates that possibility that it will generate revenue but also eliminates the possibility that you will be able to put stock in its place that can make money.  Space utilization in warehouses and distribution centers is critical for generating revenue and producing positive labor performance measures.  

Having obsolete inventory in warehousing and storage facility usually results in a drag on productivity.

Running a velocity report can provide you with the information needed for you to make an effective decision regarding dead inventory.  Getting rid of dead inventory does not always result in a write-off.  The stock potentially can be returned to vendors, aggressively discounted, donated to charity or disposed of properly.

Conclusion

As 3PL, warehouse and distribution center operators, there is the natural tendency to set up a warehouse, processes and technology and then not revisit these issues for years.  The old adage “if it ain’t broke, don’t fix it seems to apply to the way many warehouse managers think about operations and training.  Now that we are in a new year, take the time to re-evaluate your resources. Make sure that your workforce, warehouse layout and inventory management strategies are properly aligned to make your business the most money possible and provide you with a competitive advantage.

The problem is that warehouses do need to change because the supply chain logistics industry is undergoing such tremendous change.  Holding onto excess or obsolete inventory, retaining the same standard processes for years, ignoring the opportunity to collect and use labor data may be signs that your company is resistant to change.  Warehouses and distribution centers need to evolve and be more flexible.

Today the supply chain operates in a dynamic whirlwind of change.  Every warehouse and distribution operation needs to continually re-examine warehouse practices and processes and make sure every warehouse worker has the proper, consistent training to ensure success.

Be ready, be open to change or be left behind.