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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.

8 Easy Ways Any Company Can Improve Inventory Management

StrategyDriven Tactical Execution ArticleProper inventory management is one of the keys to keeping your business running smoothly and remaining profitable. Make mistakes here, and you may run out of best sellers, buy products you don’t need, and waste resources you can’t afford to lose. Here are eight essential inventory management tips every business should follow. We’ll focus on universal advice that almost any firm can implement.

Manage Inventory via Software

Don’t rely on spreadsheets to track software. Spreadsheets can be deleted. Cell values could be deleted or overwritten. Formulas may be altered, scrambling values elsewhere in the spreadsheet.

One of the best ways to manage inventory is by using software designed for this task instead. The ideal case is switching to inventory management software that integrates with your accounting system. Then the inventory is automatically updated as you sell items or buy more. That is why a QuickBooks Inventory management tool is invaluable – it is already tied to software you already use. QuickBooks lacks serial numbers, scanning barcodes and shipping. An inventory management tool can handle all of this. There are several tools that will allow you adjust stock levels in inventory checks and automatically remove inventory from stock when you receive orders so you don’t accidentally sell more than you actually have on hand. They will also help you track items reserved for sales orders and you can track inventory status, such as when you’re waiting for products to arrive so you can fill outstanding orders.

Have Clear Product Names

If you want to avoid problems with customer orders and internal inventory management, have a clear product naming system. You could use manufacturer part numbers, though this may be confusing if different manufacturers use similar part numbers for very different products. The ideal situation is creating internal part numbers that make it very obvious what someone is picking up. Instead of CRAY008 and CRAY016 for crayons in boxes of 8 and 18, label them “crayons, set of 8” and “crayons, set of 16”.

Set Minimum Stock Levels

Nearly every inventory management system allows you to set minimum stock levels, and most have reorder points. This ensures that you won’t run out of items. The best inventory management systems allow you to calculate reorder points based on historical data so you can order items based on how quickly you actually consume the product. You can still set low inventory alerts to ensure that you never run out.

Implement FIFO

FIFO is first in, first out inventory management. This is one of the oldest inventory management techniques, and it remains one of the most popular. A major reason of this is that it minimizes spoilage and the associated waste, since you’re selling the oldest items first. This isn’t limited to perishable goods that can spoil; it is applicable to other products, as well. Move your oldest products first so that they don’t become obsolete due to changes in packaging or industry standards. It simply requires setting up inventory so that the oldest items are on the front of the shelf and picked by employees, though you’ll want to train people to check expiration dates. You’ll also have to train staff to ensure that the FIFO system is properly maintained, instead of someone hurriedly stocking the front of each shelf with the newest products.

Keep the Warehouse Organized

If the warehouse itself is disorganized, how can you reasonably expect your staff to keep your inventory organized? Don’t let crates of packaged inventory pile up in aisles; have them immediately emptied and the shelves stocked. Keep work surfaces as clean as possible. Make certain that items are clearly labeled.

Also, make sure that you have formal processes for each task. Document how people perform tasks like placing purchase orders, receiving items, fulfilling orders and checking stock levels.

Do Regular Checks

Inventory management systems don’t eliminate the need to do inventory checks. People may make mistakes when checking in deliveries or in their data entry. Theft, spoilage and property damage may erode your inventory, too.

There are two main ways to check inventory. One way is with a complete physical inventory – checking all inventories – usually done at the end of the month. The other way is with cycle counting, counting small sections of the inventory on a particular day. You can mix and match with these tactics, such as doing surface area cycle counts for particular aisles in the warehouse each day but checking large physical item inventory every quarter or year.

Prioritize with an ABC System

An ABC system allows you to prioritize inventory checks and product maintenance. The “A” items are high value items that have low turnover. “B” items have some value and sell at a steady rate. “C” items have low value but sell in large numbers. “A” items should be checked for spoilage, maintenance and theft regularly, since you have so much money tied up in them. “B” items are a lower priority, since they don’t cost you as much but do move steadily. “C” items require little attention since they move quickly and cost very little, though you’ll want to make sure you have enough in stock.

Only Order with Purchase Orders

Only place orders via purchase orders. Don’t let employees place orders over the phone with your vendors. They may order items you don’t really need or can’t afford to buy at this point. By requiring people to order via a purchase order, it forces every purchase to be checked against inventory levels and the budget. No one orders an item that’s already on its way from the supplier. It creates a paper trail so that no one is surprised by a delivery of widgets. There’s no confusion regarding the payment terms or rush to figure out how to pay for something that just hit the dock. It ensures that inventory knows when to expect delivery and gives management a chance to negotiate purchase prices.

You cannot afford for the gap between accurate inventory numbers and bookkeeping to grow. This knowledge gap prevents your firm from being able to plan for the future or know the true state of operations.

Executive Briefing Cost Reduction Opportunity: Inventory Optimization

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Why Every Business Owner Should Study Supply Chain Management

No matter if you run a manufacturing business or  a small online store, you need to stay competitive by making sure that you reduce waste and improve customer satisfaction every day. Supply chain management is sometimes considered as a posh name for logistics, but it does entail much more than making sure that products are delivered from Point A to B. If you are serious about improving your business and your productivity, you have to take supply chain management more seriously in the future. Find out more about why it is important for every 21st century entrepreneur.

Improving Productivity

Having an effective supply chain management system in place will reduce idle times in your business. Even if you deliver services for customers, you will need to make sure that you complete the work in time, and get paid faster. Nobody wants to pay employees to sit around, therefore, getting the work done as soon as possible, delivering it to the client, and getting paid in a shorter time will free up time to complete other jobs. This will improve your organization’s performance, and you can benefit from more value created each day by your company.

Reducing Regulatory Risks

Having a supply chain management can also reduce your organization’s risks of non-compliance. By managing your suppliers and contractors effectively, you can conduct spot checks. When documenting the different processes that take place in your company, you can find the risks easier. If you evaluate your contractors regularly and check their processes, you will have a better chance of complying with the current regulations, and making sure they do everything by the books.

Utilizing Talent Better

If you have an effective supply chain management system set up, you’ll be able to get everyone the right job in your organization. By measuring the performance of different processes in the organization, you can find the right match for your talent. If someone has an outstanding performance on one job, but they underdeliver on other areas, you can identify the gaps in their skills and knowledge and provide them with support and training that will not only make them more valuable for the company, but also more motivated.

Preventing Fraud

By following the route of products or services from the point of order to delivery, you can track materials and reduce the risk of fraud within the organization. You can track your spendings and your inventory, and control your costs. If you check the qualities and keep an eye on the stock, you can prevent internal fraud as well.

Reducing Waste

One of the main benefits of having a well-designed supply chain is that you can reduce waste. By following up the route of raw materials through the channel until they become the end product. Identifying waste will be easier, and you can address the quality issues as soon as possible. This will leave your customers more satisfied, and there will be more money left in your pocket, too. From making sure that no two employees have to do the same job twice to reducing the waiting times, there are several ways your company will benefit from an improved supply chain.

Improved Delivery Times

When your supply chain runs smoothly, you can get better delivery times and serve your customers better. Choosing the right delivery company is crucial. Check out Jayde Transport to find out more about additional tracking services and supply chain solutions that can take your company to the next level. When you deliver faster than other companies, you can build a competitive advantage and improve your customer retention rates. This will translate to higher profitability and reduced marketing costs.

Better Quality

Quality assurance is important in both manufacturing and wholesale. If you are able to check the quality at different stages, you can improve it over time. Adding checkpoints in your supply chain will help you identify defects and address them. This means that your customers will always get the best quality product or service, and you don’t have to spend money on external audits to find out where your profits disappear.

Customer Satisfaction

If you record when an item or enters a new process, you can account for all materials, and provide your customers with up to date information, too. Customers will get a product that has been followed up and checked at different points, so there will be fewer complaints related to quality. When designing your supply chain, you will need to have customer satisfaction in mind. From maintaining a constant quality to eliminating waste, everything will improve your end product and customers’ experience.

Reduced Operational Expenses

As a result of maintaining quality standards, reducing waste in terms of materials, resources, and time, you can improve your profitability. By managing and tracking your expenses, you can offer more value for less to your customers. If you implement quality checks in your supply chain, you can save money on replacements, refunds, and time on separate checks.

Improved Strategy

A supply chain management will be helping you create a better long term strategy. You don’t have to micromanage the different stages of product or service delivery, and you can focus on the things that matter. If you can predict delivery times and the cost of production, you can calculate the profits better and make continuous improvements to increase your income. Creating a strategy that is focused on building company assets will help you remain competitive, no matter which industry you are in.

Whether you are in the wholesale business or deliver services for businesses, managing your supply chain and improving it constantly will help you achieve higher profits and better profitability. You can improve your customer satisfaction and retention rates, while managing your talent and resources better. Studying supply chain management will have more several benefits for you as a professional and your company, other than another degree on your office wall. Through keeping an eye on the supply chain, you can make processes more effective and better functioning.

Conscientious consumers or creatures of habit? A focus on our supply chains

We are all consumers, no doubt about that. And I think it’s safe to say that we are all creatures of habit…to an extent.

We buy the products we are familiar with, the products that we grew up with. This is definitely true for me. When I first left the family home and moved out into the real world on my own, I remember doing my first ‘big shop’ at the local supermarket. Without really thinking about it, my trolley was slowly but surely filling up with the products I recognised from the time of living with my parents.

Without even realising it, here I was buying the products that my parents had used because they were familiar to me. There was no other real reason behind my choice (apart from probably cost).

It got me thinking… how much thought do we really give to the products we buy?


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About the Author

Laura GibbonsLaura Gibbons is a driven and committed marketing professional with over 10 years’ experience. Working closely with Ideagen’s Marketing Executives and Partner teams, Laura is responsible for looking after the Ideagen brand across multiple sectors within the region.

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