6 Tips for Making Your Warehouse Profitable

Warehousing and logistics is an industry in significant flux right now. External factors like the meteoric rise of eCommerce and the trucking capacity crunch have created an environment where few can predict what the next day will bring. In such a time, it’s critical for warehouses to operate with both efficiency and flexibility — but many businesses still haven’t taken a good hard look at their warehouse and logistics operations for opportunities to streamline processes and reduce waste.

With so many big changes rippling through the warehouse industry, now is the time to take advantage of recent advances to make truly impactful improvements. Whether a business is getting a new warehouse set up for the first time or seeking an efficiency boost for existing warehouse assets, there are some key best practices that will help use today’s best technological assets to create a productive and profitable work environment.

StrategyDriven Tactical Execution Article | 6 Tips for Making Your Warehouse Profitable
 
1. Get the data needed to make the right choices.

A business that doesn’t have the right data will find it much harder to make the right choices, particularly when it comes to logistics. Businesses must ensure that their data tracking is relevant, accurate and robust. A few key questions to determine the state of a warehouse’s data tracking include:

  • Do inventory monitoring systems provide an accurate picture of what’s actually in stock?
  • Is it easy to pull up a report on KPIs, including historical performance data?
  • Are returns efficiently tracked and managed?
  • Do the currently targeted KPIs give an accurate picture of profitability drivers?
  • Is data accessible in real time as orders flow through the system?
  • Are all lots fully traceable?

Many warehouses are still lagging behind in data collection capacity. For those with room to grow in this area, it’s time to begin looking at solutions that collect data, consolidate it and make it easy to use.

2. Optimize information flows with an ERP system.

Today’s business has to deal with a head-spinning array of data streams, so it’s critical to have a platform that can collate them all and help find the narratives in the numbers. Many businesses don’t want to admit that their data collection on their warehouses isn’t as robust as it could be. However, there are some technologies that can help, namely enterprise resource planning (ERP) systems.

ERP systems first came to prominence in the ’90s, but today’s sleek, cloud-based ERP models have little in common with the bulky and hard-to-use software of the earlier era. These high-performance distribution and manufacturing software products provide a common platform to collect all of a warehouse’s most important data, including:

  • Inventory burn rates and reordering thresholds
  • Inventory carrying costs
  • Backorders and backorder rates
  • Order lead times
  • Picking accuracy and time
  • Receiving and shipping data
  • Customer information

These powerful platforms are often now available on a software as a service model, reducing the initial investment required as well as the work needed to install them. In an economy plagued with continued uncertainty, ERP systems have emerged as a key tool to reduce waste and create more efficient logistics strategies.

3. Analyze and refine the picking process.

In many warehouses, the picking process forms the bulk of the average employee’s job. Thus, any warehouse that can find ways to reduce costs while maintaining efficiency in picking will find itself at a significant advantage in becoming profitable. Many businesses even pay warehousing consultants to refine their processes, but it’s possible to start a little smaller and still see great results.

One of the simplest ways to increase picking speed is to organize inventory more effectively. The “ABC System,” which organizes items by which ones are most frequently picked, is one of the most widely known and effective. But there are numerous organization schemes a business can employ to create an efficient warehouse, and the most important thing is to choose one that suits the company’s unique needs.

StrategyDriven Tactical Execution Article | 6 Tips for Making Your Warehouse Profitable
 
4. Evaluate technology training practices.

If the employees aren’t trained to use it fully and correctly, having the latest technology won’t create the benefits most businesses are looking for. Many warehouses operate in an adequacy mindset, where employees know how to use the technology just well enough to perform their required duties. One of the best ways to maximize the profitability of a technology investment is to offer in-depth employee training that helps users gain a more thorough understanding of the technology they use.

One great place to start? Many technology companies offer webinars and training materials that are targeted to help workers use their products more effectively. Warehouses should take advantage of these resources, as there’s no better way to learn about a technology than to work with the teams who built it.

5. Maximize the value of inventory real estate.

Storage space is the bread and butter of a warehouse, so it’s important that the use of that space be optimized. A business is paying for every square foot of space they rent or buy, and most businesses have some square footage in their warehouse that’s simply not pulling its weight value-wise. Some strategies to improve the value of space assets include:

  • Reducing on hand inventory of slow-moving items
  • Using forecasting models to guide inventory decisions
  • Creating vertical storage systems that allow more inventory storage per square foot
  • Ensuring an accurate count of inventory
  • Renting out unused space in the warehouse to other businesses

6. Automate where it makes the most sense.

Automation is one of the most prominent trends in the warehousing and logistics sector, but each business must find its own way to harness the power of these technologies. Any or all of the following can create great results when applied to the right business model:

  • Using pick process algorithms to generate pick route maps for employees
  • Creating a system that automatically selects shipping and packing methods based on product type
  • Using collaborative robots to work alongside pickers and packers to make processes more efficient
  • Implementing an RFID system to make scanning and inventory faster
  • Using automated route planning systems to optimize routes and minimize trip and idle times for vehicle fleets

One important caveat: While automation is the wave of the future, the technology still isn’t fully mature yet, which means that there will likely be many more periods of growth and change to come. Businesses should be careful about betting too heavily on one kind of automation technology that could become obsolete in the next few years.

StrategyDriven Tactical Execution Article | 6 Tips for Making Your Warehouse Profitable
 
While the unsettled current state of logistics poses challenges, it’s also a time of significant growth and opportunities. Businesses able to harness the new waves of logistics tech and combine it with solid grounding in the fundamentals will find that new pathways are opening up every day for those with the vision to see them.

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