10 Ways To Increase Efficiency And Reduce Warehouse Operational Costs

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Maybe someone once said in a slightly insinuate tone you, for example by saying "Do you know, managing a warehouse is a fairly easy thing, why you look hard at it. All you have to do is manage the workforce, goods, and supplies only ". And other questions that seem to attack you.

In some ways, it is possible what he is saying is true (in theory), but in practice in the field, it is not as simple and easy as that. For example the delivery of goods to customers, where now it has become a considerable cost and keeps increasing from time-to-time so it requires more attention than you. Constant reviews and changes are required to keep shipping costs competitive and not lead to increased overhead costs.

Another example is the labor cost that continues to increase annually due to government policies that have applied a worker's minimum wage annually. Therefore, you are in demand to continue to focus on ways to improve your workforce productivity.

To answer the satire above, all you need to do is tell him, "What do you say is right (in theory), and the operational activities of the warehouse at its core are only associated with these three things. I always strive to manage the operations of warehouses to be effective, efficient by continuously adjusting developments that continue to happen. Thank you for your suggestion. "

Inventory is the number one balance asset in most business companies. Slotting and good location control will help you to track the products inside your warehouse.

10 Ways To Increase Efficiency And Reduce Warehouse Operational Costs

As a reference for you, here are 10 ways to increase efficiency and reduce your warehouse operating costs, which you can do, among others:

1. Controlling Inbound and Outbound Goods

Inbound logistics activities are more related to material management and follow, namely the delivery of raw materials and spare parts that come from suppliers. This activity focuses on the movement of raw materials and the spare parts in the manufacturing plant. Inbound activities involve two parties i.e. suppliers or vendors and companies.

In simpler terms, inbound logistics is the main activity, which focuses on the purchasing process and scheduling of incoming goods. It means that inbound logistics covers all these activities, namely ranging from the supply, ordering, sending, and receiving raw materials and spare parts from the Supplier. 

In this case also includes handling of raw materials, transportation, stock control, and inspections to ensure that the goods are ready to be used for the production process.

The basic concepts of inbound logistics are as follows:

• Find and select suppliers (vendors)
• Request a Quote
• Negotiation Price
• Create Order Items
• Specify the delivery date
• Receive Items and store items

While outbound logistics activities are activities related to customer service and distribution, namely the delivery of finished goods (finished goods) from the company to customers. This outbound activity focuses on transporting finished goods or products from the company to the customer. Outbound activities usually focus on two things: warehousing and transportation. Interactions that occur usually involve companies and customers.

The basic concept of outbound logistics is as follows:

• Finished products are stored in the warehouse
• Accepting Customer Orders
• Choose transportation (based on item volume, urgency, and delivery location)
• Order delivery Process

Inbound and outbound activities should always be your concern and focus, as both activities are vulnerable to increased prices. So you have to be clever in negotiating the price to always be competitive. Any price increase that occurs will result in reduced company profits.

2. Incentive Payments

Payment of well-managed incentives to pay performance can bring a huge increase in your workforce productivity. More than 50% of your warehouse labor activities are selecting goods and packing the goods, so you should start there.

3. Simplify Processes, Reduce Touch, and Cost

The basic concept is the fewer touches you do to your stuff, the less cost you'll have to spend. Make sure when the goods get into the warehouse to place them in places that do not interfere with mobility and the movement of warehouse employees.

Do not place the goods in the alley between the two shelves, because it will interfere with the traffic of the warehouse equipment. If you are forced to put these items on the floor then be sure to find a location that will disturb the movement and activity handling of goods.

4. You Can't Improve Something You Can't Measure

Does your operation receive and manage the KPI (Key Performance Index)? Do you think it matters? Do you know the low productivity and cost of the orders being sent, and how much does it cost per box? You can start analyzing and measuring it to get the numbers that fit to be the parameter. 

At least you do the measurement and monitoring consistently for three months before deciding that the number is fitting to serve as a reference or measurement parameter.

After that, then you can make feedback to employees to do monitoring the performance of individuals and departments. They will then respond and give you higher productivity.

5. Develop an Effective Frontline Manager

A competent and effective manager is he who can execute problems well. Its ability to efficiently manage all aspects of a warehouse problem affects your operational costs, which is the spirit of work and quality to comply with customer orders. He knows clearly what their customers need and knows with details about your products so that they can clearly explain to customers.

6. Supply Chain

Changes in supply chains include scheduling inbound purchase orders to manage better outside warehouses. Develop vendor compliance policies, including purchase terms and conditions, timely delivery, item quality and specifications, route guidance and import guides, product packaging, and labeling. 

Encouraging quality and added value to supply chain services to vendors so that products are ready to be stored or shipped. This will reduce labor for the rework of errors that occur.

7. Voice-Supporting Technology

Some vendors reduce costs by making this technology available on the market for all different businesses. Enabling sound technology can be applied to all processes and departments, ranging from receiving goods to deliveries, to better inventory control and increased productivity.

The system has a quick install time and does not require IT or modifications to your warehouse does not require extensive training and has a fast ROI of about four to six months.

8. Consider Third-party Logistics

Using a third-party logistics service provider (3PL) can be one of the ways you can use it. Using 3PL partners means that the capital is not tied to new facilities and systems. For smaller enterprises, the 3PL allows management to concentrate more on the marketing and merchandising functions important to maintain the company's business growth. You also need to increase warehousing, storage, or throughput of orders, and 3PL can be used as an option.

9. SaaS System (Software-as-a-Service) vs. Licensed

Investing in the management or system of WMS (Warehouse Management System) is something that companies do only every 5-10 years due to the time frame of investment and implementation. The SaaS Subscription system Model provides the option to acquire a new system at a lower cost. 

However, it is important to understand long-term SaaS costs vs. one-time purchases and the traditional yearly system support. It also compares with the details of the warehousing function in the WMS SaaS. You'll usually find more effective warehouse functionality that can lower costs and improve services to your customers.

10. Continuous Improvement Process (Visit Improvement)

You have to measure everything and do monitoring and analyzing the results. After that, do the assessment. Do a plan to make repairs if there is a deficiency found. Set goals and accountability for improvement, review progress, and start monitoring again. So on so that the results can continue consistently.

That's a description of the article about 10 ways to increase efficiency and reduce warehouse operational costs. Hopefully can add to your insight.

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