Your warehouse is the heart of your company. When operating properly, it can increase your profits, reduce your overall costs and keep your customers happy. However, in order to achieve that, you need to establish a well-planned strategy to boost your warehouse’s productivity while reducing costs.
It can be easy to fall into the trap of spending way too much money on things your business doesn’t really need trying to keep up with the competition. Inefficient warehouse operations can easily contribute to inconveniences and long wait times which are one of the biggest reasons for customers to stop buying from you.
Furthermore, inefficient operations can also lead to wasted labor. Research has shown that in a U.S. warehouse, wasted motion can result in losing 6.9 weeks per year. Consider how much better your warehouse would operate if you had almost 7 extra weeks of labor time?
Wondering how to reduce warehouse costs? There are several things you can do to improve your warehouse efficiency, spend less and make more.
1. Optimize Warehouse Storage
Nowadays, more and more consumers are shopping online, which implies there is a bigger demand for supplies and an increased need for expanding inventory and warehouse storage space. What’s more, a study conducted in 2018 has shown that there is an increased number of customers demanding customized products to suit their exact needs.
A bigger number of product variants means more inventory is added to your warehouse. This might eventually mean you would need more storage space. However, it’s not always easy to expand. So, instead of increasing the footprint of your warehouse, try to make better use of your vertical space.
Aisles can be a great way to make navigation easier for your employees and machinery. The faster a product can be spotted in your warehouse, the quicker it will be loaded for distribution. For this to run as smoothly as possible, your best bet is to learn the dimensions of the different machinery and forklifts that are typically used for each kind of product.
Organize your inventory by the needed aisle dimension for machines to access the products. Inspect your space and, if possible, minimize the width of inefficient aisles.
Racking is the best way to optimize your storage space and safely store your inventory. Narrow and tall racks are the most commonly used type. They can be a great solution to increase the square footage for pallets.
Whichever option you choose to go with, do not forget the safety factor – use the suitable racking system for the type of inventory you have.
2. Inspect Lanes and Routes
Picking orders and bringing them to pack stations can take a lot of time in a warehouse. Your employees can end up walking hundreds of miles every single day, resulting in longer order-fulfillment times. So, when you are spending so much money on your staff, you should optimize the work they do on a daily basis.
One of the best ways to cut costs is to optimize your warehouse’s routes and lanes to make it easier for your employees to move faster. The speed of picking and packing orders will depend on the location of each product. For that reason, it’s best to store items closer to their end goal.
Check the statistics of your warehouse to get an idea of the most frequently bought items and to see which products are commonly sold together. Organize and move these to the closest racks to your packing stations.
As you grow, you can incorporate advanced picking techniques, as well as a warehouse management system (WMS) to analyze and optimize your picking routes. You can even make each aisle a one-way route.
Certain analytic tools can help you to more effectively deliver orders to pickers, show them the best route through the warehouse for their orders, and help them understand how other pickers are moving around.
This can be of great help for your business as it can significantly reduce the time spent unnecessarily walking back and forth.
3. Embrace Energy Efficiency with LED Lights
As is with most large industrial buildings, warehouse operations require a lot of energy. If your working space is not properly lit it can dramatically impact the performance in your warehouse and pose safety risks. Regardless of the main function of the area, be it picking, packing, storage, or shipping, the proper lighting can improve worker visibility and accuracy of the work that’s being performed. What’s more, efficient lighting can also minimize operating costs and positively affect your business’s bottom line.
There are various things that you can do to reduce energy consumption in your warehouse and thus save up on your electricity bill.
Many businesses around the world still have metal halide lights installed in their warehouses. These lamps became popular due to their high-quality light. Nevertheless, they have their drawbacks. They need longer to warm up which means they can’t be switched on and off as needed which is why in most cases they are left working for long periods of time. Taking into account that warehouses use a large number of lights for their operations, this can significantly affect the company’s electricity bill.
A simple yet very powerful solution to reduce energy consumption in a warehouse is installing LED High Bay Lighting Fixtures. LED fixtures are the most energy-efficient solution on the market today thanks to their excellent features. LED lights can be instantly turned on and off as per your needs, helping you save money on your electricity bills.
In combination with LEDs, it makes sense to also install occupancy sensors or vacancy sensors that will emit light only when needed. Occupancy sensors automatically turn on and off when they detect motion. Vacancy sensors need to be manually turned on, however, they turn off automatically if they haven’t detected motion in the room after a certain time.
There is a lot of movement in warehouses with people going in and out all the time, and sensors are an effective way to control lighting costs.
Although there are various upfront costs when installing LED lights, this efficient warehouse lighting will help your business save money in the long run on both replacement and energy costs. LED lights have a much longer lifespan when compared to metal halides. One LED bulb has a lifespan of many metal halide bulbs, which means you’ll also save up on maintenance costs by switching to LEDs. If you’re considering updating your bulbs with LEDs, your warehouse’s loading docks, parking lots, and exit signs are excellent areas, to begin with.
Make sure to review and inspect your lighting system regularly. Warehouse needs and requirements can change from time to time, even more so in this era when online shopping and home deliveries have become the new normal. Warehouse efficiency and safety go hand-in-hand and installing a high-efficiency warehouse lighting system is an excellent way to make significant improvements.
4. Improve Air Tightness
In big industrial buildings, the constant opening and closing of doors can easily lead to heat loss. For this particular reason, improving airtightness in your warehouse and efficiently using exits and entrances is an excellent way to reduce energy costs.
To make your warehouse more energy-efficient, the main focus should be on warehouse docks. When trucks and vehicles arrive and leave the building with cargo, the docks are typically left open.
When it comes to truck bays, pay attention to the cushioning or weather stripping around the opening of the bay door. Regularly maintain it to make sure that trucks seal right up to the bay to minimize air infiltration from outside. To ensure that, you can also install dock shelters or seals.
Installing automatic doors with sensors is a great way to prevent delivery doors from staying open longer than needed. Besides reducing the amount of hot/cold air that can escape from your warehouse, automatic doors are also more efficient for employees.
If, on the other hand, your warehouse operations require your doors to be open a great part of the day, the smartest thing to do is to install air curtains. This practical solution can prevent the hot/cold air from moving from one area to another.
5. Maintain Your Machines & Use Them Wisely
The equipment you use in your warehouse can cost a fortune. Waiting too long to perform regular checkups and maintenance may lead to unnecessary costs and efficiency problems. For that reason, it’s of utmost importance to routinely inspect your machines to ensure they will perform as expected and will not cause any workplace disruptions.
Besides reducing downtime, regularly maintaining your equipment can also reduce the risk of employee injury. Your staff is your most valuable and irreplaceable asset. End products can be reordered or repaired, customers can wait if needed, but your employees’ health and well-being should be on top of your priority list. If you can prevent even one injury in your warehouse, it’s all worth it.
Furthermore, there are a few other ways you can save money without lowering your standards.
For example, if possible, you can use each piece of equipment to perform more than just one task. It would be much more expensive to run and operate with two different machines if one can get both jobs done.
You can also consider renting any pieces of equipment that you only use occasionally. This might be a more cost-effective solution rather than your machines sitting idle for long periods of time. Along the same lines, you should also consider the costs of leasing versus buying the needed machines.
6. Upgrade the Mobile Technology In Your Warehouse
Increasing your operational efficiency typically requires having the proper technology for the job. Improving your warehouse’s fulfillment speeds and order accuracy in most cases is tightly related to how orders are delivered and verified.
Mobile technology offers a convenient way to update and check orders while your employees pick and pack them. It’s one of the smartest investments you can do for your business.
Besides barcode scanners, your team can also use tablets and smartphones with WMS software to receive pick orders and determine the best picking routes. With the help of WiFi, your employees can be anywhere in your warehouse and still receive the order.
Nowadays, most of these pieces of mobile warehouse technology have ergonomic designs. Besides preventing employees from strains and avoiding injuries, they can also perform various functions. These pieces can be also equipped with RFID scanners, cameras, and touchscreens.
Upgrading your warehouse technology can minimize the percentage of picking errors by 67% when compared to manual methods. That can result in enormous cost savings if you calculate the money you’d spend processing order returns, shipping, labor, and more.
There are many ways to make technology work for you. If you don’t already have a special warehouse management system, it’s high time you implemented one. Having important specifics and information at your fingertips can save you so much time and headaches and can make it much simpler to find whatever you may need.
7. Inspect Your Product Packaging
Many companies view packaging as a necessary cost that has to be met. After all, your product packaging can speak volumes about your company. Besides protecting your products, it can also carry your branding and it is usually the first thing customers see when they receive their order.
However, in many warehouses, there is a lot of waste in order fulfillment. When selling different kinds of products, different teams have to prepare the products for shipping. Sometimes, specific packaging or even packaging removal can be required and involved in the process.
To reduce warehouse costs, inspect your packaging operations to see if there are any ways to minimize the number of boxes, sizes of boxes, and various other materials used to pack products for sale. Double-check with your suppliers to see if there are any chances of having a greener packaging process.
During your review, you might end up realizing that your employees use way too much material which consequently increases your costs of handling and shipping. Similarly, you should also make sure that your employees aren’t using inappropriate or too little of the needed packaging materials. This may lead to product damage and customer returns and end up costing you even more.
8. Offer Customers More Pickup and Delivery Options
You can significantly reduce warehouse costs and transfer the burden of inventory by moving the products you offer downstream to retailers. Some of the biggest companies in the world of retail, such as Target, have shifted inventory to retail outlets.
If your business has retail locations where you can go through the process of fulfillment, you can always enable your customers to opt for local pickup and free you of the obligation of delivering their goods. As I mentioned above, Target stated that around 15% of their online shopping orders are marked for local pick up in-store.
If your company does not have a brick-and-mortar location, you can always consider Amazon Fulfillment. This center helps retailers and suppliers to offer their goods on the market while their products are being stored and fulfilled by Amazon’s warehouses.
And that’s not all – Amazon has also introduced another type of buy online, pick up in-store. Thanks to it, consumers can buy products online and pick them up at an Amazon Locker. After receiving a pick-up code, buyers have 3 days to pick up their order in-store.
9. Standardize Workflows
Since a product arrives in the warehouse until it leaves, each activity involved in the moving of that product needs to have a pre-established workflow. Without a certain set of rules and predetermined workflow, employees will work in a way that’s either most comfortable or most efficient for them. However, the best method of working for an employee may not be the most profitable for the company.
With the help of automated workflows, you can easily make sure each employee works according to the same standards. What’s more, you can monitor the performance of each employee against the benchmarks set for that aspect of the workflow.
In case fulfillment issues that can affect operational costs arise, a quick review can unveil the workflow bottleneck. If it’s a problem with performance, the management team can talk to the employee to fix the problem and restore the workflow.
Before anything, remember – your employees are the heart of your company and the workflow process. With the right people and the right workflow, you can easily reduce costs and make your warehouse more efficient. Your employees are the driving force of your warehouse and you should always turn to them whenever you want to optimize workflow efficiency. Always give feedback and enable your team to show you how they think each task can be improved.
10. Train Your Team Properly
None of the changes I talked about above will reduce warehouse costs and make it more efficient if your employees are not ready to embrace them or lack a management plan to get used to the new principles of working. When trying to improve warehouse efficiency, do your best to plan and communicate with your team as much as possible before, during, and after the shift in operations.
Inform your team about what they should expect. Train them for any new machinery and show them how things are changing and how this will improve their performance. After a certain period of time, review your strategy and their new working habits and principles to make sure that they follow your new policies. If your staff has any questions, do your best to answer them as clearly and concisely as possible.
Your profits depend on the people working in your warehouse. They use the new pieces of equipment and the new systems, they do their best to follow new practices, and may have just the right idea to improve warehouse operations.
Treat them properly and always give them the help and training they need. After all, the best and most efficient teams are the ones that are happy with their job and well educated on how to execute properly.
A Final Word
Each of the above-discussed recommendations can help improve your warehouse efficiency. Performing an audit of your business operations can help you discover bottlenecks and detect opportunities to reduce warehouse costs.
As you implement some new measures and your costs decrease, you can use these savings to finance the more expensive options. Every change you will make might lead to discovering other ways to reduce costs in other areas of your company.
At the end of the day, every business and every warehouse is different, so some ideas and suggestions might not work for all. However, keep in mind that every measure you take can result in great potential gains in the long run.
About the Author
Dwayne Kula is President of LED Lighting Supply. On any given day, Dwayne is writing content for the site and helps manage the marketing initiatives that are on-going. He has a Software Engineering degree and still dabbles in writing software for the company as needed. When not working, he enjoys spending time with his family, working out, playing the occasional game of golf and exploring New England.