How to reduce your warehouse costs.
When it comes to improving the profitability of your warehousing operation, one key side to the equation comes through reducing your costs. Moderating your warehouse costs is made easier when you use a warehouse management system (WMS).
Here are 6 ways that a WMS can help you to reduce your warehouse costs.
Improve productivity.
A key contributor to reducing your cost of sale comes through improving your productivity.
Businesses that employ a WMS can typically reduce their labour costs by 20-30% or more, through improving productivity. Using the power of a WMS, you can process more orders with the same number of operatives.
Significant cost of sale savings can be made with changes in order picking, which often make up around half of all warehouse labour costs. A WMS can reduce the time your staff take to locate stock by 50-100%. Added up over the number of operatives and the hours worked, this can represent a significant financial benefit for your business.
A WMS also adds value through its comprehensive reporting and system suggestions about optimising staff deployment. This might be through incorporating advanced productivity strategies such as task interleaving. Or perhaps you can benefit from employing different picking strategies, ensuring picking is done more quickly and efficiently. By maximising your operatives’ time, you are not paying employees to walk further or for longer than they need to.
Improve stock accuracy.
When you use a WMS, you increase your levels of stock accuracy. Goods are not only tracked precisely into and out of the warehouse, but a WMS also helps with cycle counting. With cycle counts, lines of stock are counted, but not all together at the same time as you would have to do with a full stock take. Depending on the size of your warehouse and the stock you carry, you might count just one SKU per day, or perhaps one pick face per day. You can also choose to count Items according to their popularity, with the most frequently purchased items – or those with the highest sales revenue – being counted most often.
Using a WMS, you can also undertake stock counts without having to lock bin locations. So, you don’t need to halt picking on the range of bins while they are being counted. This functionality is enabled by scanning technology providing point in time readings.
Regularly validating stock levels through cycle counts maintains stock accuracy and prevents significant stock inconsistencies that might result in your warehouse needing to close while quantities are confirmed – which could mean you paying additional overtime to cover a full manual stock count.
Improve shipping accuracy.
Distribution costs are a significant factor in a warehousing operation. Shipping issues – like despatching the wrong item, or the wrong quantity – can damage you. It’s estimated that a typical mis-ship error will cost around $200 to correct on both the shipping and receiving ends. Plus, the poor customer service you have delivered can lead to you losing future business from that customer and from others they tell.
Order accuracy is vital in reducing and minimising operating expenses from shipping. With shipping accuracy up to 99.9%, a WMS can help you to get orders right the first time, assuring you continue to provide great levels of customer service, avoiding having to spend out to remedy incorrect orders and therefore creating a positive effect on your income.
Eliminate costly admin.
A WMS can reduce almost all of your manual admin burden, saving time and money. For example, using carrier integration, you eliminate the need for staff to manually input order and address data for third-party carrier systems, like UPS, DHL, DPD and so on.
Using labour planning functionality, your WMS will automatically assign work to staff, which would ordinarily have been done manually by one of your supervisors. Integrated with RFID scanning equipment or automation such as robots, the WMS will direct workers through assignments during their entire shift.
Finally, you can access real time reports and analysis, preventing the need to build and run complex reports, and eliminating the inevitable data capture that would be required.
Reduce stock holding.
Without a WMS, your ability to assess optimum stock-holding levels is limited. Having too much stock tied up in storage affects your working capital. With better stock forecasting and assessment, you can typically expect to reduce the money you have tied up in their stock by around 20%.
Inventory carrying costs don’t just have a one-time cost, either. Although reducing the stock you hold gives an immediate working capital benefit – as there’s a lower investment in the stock itself – it also has a future, ongoing benefit. When less stock is held, reductions in costs are also seen across other areas, such as insurance, taxes, additional warehouse storage space and inventory risk costs like obsolescence, damage and theft.
Finally, reducing the stock carrying costs results in potentially better stock turn rates. As your stock carrying costs come down, you will get a resulting increase in stock turn rates. Higher inventory turnover like this can help you maintain price stability. It also allows you to bring in new products and rotate them, and ultimately can lead to less waste, especially with time-restricted or perishable items like food and medications.
Optimise warehouse space usage.
A WMS can help show you where you might save space in your warehouse. It tracks all the storage locations and can precisely pinpoint where each item should be stored, and in what quantities.
The system also records the size, weight and dimensions of each item, along with any storage restrictions, like requirements for oversized or very heavy items, or goods that need certain temperature-controlled conditions.
Putaway is simple with a WMS. Armed with all this information, it immediately directs operatives to store items in places that optimise the use of your space. System guided putaway and pick can reduce ‘honeycombing’ too. When space utilisation is maximised in this way, there is a knock-on benefit of reducing the distances that workers need to travel.
All these features are estimated to bring companies benchmark savings of around 15%.
Re-warehousing – or moving goods between warehouses or to a different location within a large warehouse – is another feature that helps free up space. The WMS can direct this where space is available, with the system instructing workers to consolidate partial loads, which means more stock can be stored.
These space-savings methods that the WMS brings about can potentially delay the need for you to expand your facilities or prevent you from having to take on temporary warehousing. This could represent a considerable saving.
To see how much you can reduce your warehouse costs with a WMS, book a free consultation with one of our supply chain experts or call us on 020 8819 9071 to find out more.
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