Maximizing The Use Of Your Warehouse Operations
By: Larry Rausch – VP Sales and Marketing
We often see that many customers don’t fully appreciate the financial gains of maximizing their warehouse operations. There are many hidden costs in most operations and a good starting point is to understand the costs associated with storing materials in your warehouse. This post is intended to give you a few pointers on how best to maximize your storage space and help to reduce your overall costs.
To begin, If you don’t know the cost associated with storing materials in your warehouse, ask your finance department. You’ll want to look at the total value of the inventory you have on hand, such as all the inventory sitting on your loaded pallets. Then, you’ll factor in your overhead expenses associated with operating your warehouse, as well as the costs of financing the inventory on hand. Another important factor in determining your inventory carrying costs per square foot is the cost of product write-offs due to damage. There are several other costs associated with warehouse management that you’ll need to factor in as well. Lean on your finance department to help you understand your true operational costs.
Once you understand your true costs, one of the first and toughest things to address is whether you can reduce space used by focusing on the age of the inventory and liquidating overstock. Should this be the first step in your DC space study? Do you have inventory reporting that shows by SKU the weeks of supply and the inventory turnover? This will show how many weeks it will take to sell off the inventory. These are key reports when discussing space utilization with management.
Beyond the initial step of addressing your costs and potential overstock, below outlines a few ways to improve your operational efficiencies.
Consider an Off-Site Location for Overstock
If you store a large quantity of excess inventory for a few items, consider some type of offsite storage for the excess, thus freeing up space for supporting the fulfillment operation.
Employ Drop Shipping As An Option
If you store and ship large items, consider utilizing some form of drop shipping to reduce your in-house inventory and costs. How wide are your warehouse aisles? Try to design the minimum width required to match the material handling equipment used without compromising operating efficiency.
Vertical Space is Key
Look up and make sure you’re using all the vertical space available. Investigate storage media to take advantage of your clear span height. How much cubic feet of vertical space is not being used? Be sure to know how your design might impact your sprinkler design and fire code.
Assess Your Department Space
Identify functions that do not require high ceilings in areas where lower stacking heights are dictated by the clear height. We often see unused overhead space where large departments like packing and shipping are performed.
Depth of Storage
Review not only the effective use of the height of locations, but also the depth of storage; for example, consider double-depth racking.
If you have to store supplies or packing materials, try to manage the inventory to avoid overstocks. See if your corrugated supplier can keep some inventory at its site for you, and take delivery every few days.
If you have multiple locations for storing the same item, consider combining them to create better warehouse space utilization. This can be done during the put away process and as a standalone function.
Match and Right-Size Your Slots
Match the size and sales of the item to the right sized pick slot to maximize the utilization of the picking slot cube. Having various sizes of picking slots can facilitate this process. The same logic applies to locations where you store reserve or overstocks. In forward picking, keep 4-7 days of sales by SKU to reduce replenishment.
Consider Cross Docking
If possible, consider cross docking large releases of back orders or single-line orders to reduce the amount of inventory requiring storage locations.
Maximize Your Building Utilization
Make sure you study your building to determine how it can best be utilized from a space standpoint. Consider clear stacking height, column spacing, building impediments and overall process flow. Try to match vertical space needs with the building characteristics.
Consider a Mezzanine Installation
If your building layout permits, consider the use of a mezzanine to house functions that do not require high-bay storage. These can be expensive and are fairly permanent, but will maximize warehouse space utilization.
Warehouse space can often represent up to 15% of your cost per order. It is critical for you to understand your true warehouse operational costs and ways to reduce overstock. From considering aisle widths to double depth racking, you can maximize your operational efficiencies.
We hope this post provided you helpful information as it relates to best practices in warehouse management. To speak with one of our technical experts, please call 1-216-229-9300. And thank you for reading our post.