10 Ways to Reduce Warehouse Costs That Work

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Warehouse has to be like a smooth-running machine, and needs regular checks, properly trained people and a planned route to the destination. One wrong turn can easily take you off course. This is why management is always looking for improvements and cost reduction strategies. Here are 10 ideas to get you started. Some might seem obvious but the best solutions usually lie just in front of you.

Labour

1. Identify Key Staff

Aim to regularly analyse your staff and know who to trust with the most crucial and challenging tasks. Get to know your employees and what they do best, and maximise those skills.

2. Set Staff Goals and Competitions

Try setting goals for your staff teams to aim for, and reward those who perform significantly well or show the most improvement. A little competition is healthy and can give your staff a boost in motivation, leading to better morale. Minimising the number of errors made by employees ultimately leads to cost reduction.

SEE ALSO: 5 Golden Rules of a Warehouse Manager

3. Reward Major Accomplishments

If your staff have hit or exceeded major goals, reward them. Nothing improves productivity more than improving the morale of your staff. If their efforts are duly recognised, they will continue to work hard and meet further goals.

Operations

4. Reduce Inventory Through Use of Kanbans and Cross-Docking

One of the best cost reduction ideas is to minimise the amount of stock stored in a warehouse, reducing the area needed. Two major techniques that have been proven to work are the Kanban system and Cross Docking. Kanban is a lean technique often used in warehousing. Essentially, when goods are received, they are loaded immediately back into the outbound trucks where possible, entirely eliminating the storage of some items. Kanban system works by keeping a small known amount of stock in storage. When the stock runs low, an employee takes a Kanban card to the operations manager who will order more. This reduces the amount of current stock quite significantly.

5. Get Rid of Excess Inventory

Create a Material Review Board (MRB) to review slow moving or obsolete inventory. A monthly review usually proves to be effective, try selling off any stock that isn’t needed anymore as every hour it sits on a shelf is costing you money.

6. Reduce Amount of Damage to Goods

Damage to goods can be expensive and is an unnecessary cost. Ensure that trained personnel are responsible for handling packages, especially high value orders. Insurance is an obvious necessity here, but proper care and training are the only things that can limit the amount of damage and lead to cost reduction in the long term.

7. Use RFID Identification or Alternative

RFID stands for Radio Frequency Identification, and uses electromagnetic fields to identify SKUs and packages with a tag attached. The tag contains consignment information, item details and enables you to monitor the live stock levels in your warehouse. This cuts out a large amount of manual work needed for monitoring the stock.

8. Target Accuracy

Aim to measure your inventory to 98-100% accuracy. If you use RFID you can expect your inventory to be perfectly accurate at all times if you are using it correctly. If not, you should still aim high.

9. Process Returns More Efficiently

Processing returns costs more than outgoing orders. It’s necessary to rehouse the goods, issue customer credits, refunds or exchanges. Assess the use of people and systems to improve the returns process. Also try and minimise returns where possible and aim for better customer satisfaction.

10. Optimise Space

Paying for every square meter of the warehouse is one of the largest contributors to the operating costs. Make sure you fully utilise both horizontal and vertical space of the building. Consider the aisle space too, as this also contributes to the cost per pallet. Aisles should be no wider than the access equipment and trucks require.

SEE ALSO: How Expensive is a Warehouse? Capital vs Operating Costs

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