What Are The Best Ways To Reduce Warehouse Costs?

What Are The Best Ways To Reduce Warehouse Costs?

From paying staff and purchasing equipment to energy bills and admin costs, management of a warehouse is an expensive business. In a busy, complex environment, knowing where to start cutting costs can be a tricky problem to solve. There’s a risk of making changes that deliver unintended consequences, with savings in one area pushing up costs elsewhere.
However, forward-thinking businesses are continually reviewing the costs of their warehouse operations. They find ways to increase profits, while improving operational efficiency. Very often this is achieved by making better use of today’s digital tools and technologies. Innovation and change are happening fast right now, bringing new opportunities to businesses of all sizes, including SMEs.
We’ve worked with many firms, helping them make their warehouses more efficient and cost-effective. This is our guide to the best ways to reduce your warehouse costs.

The Different Types of Warehouse Costs

The first step in controlling your warehouse expenses is to know exactly how much you’re spending, and on what. Your overheads will be diverse, with each one offering potential for savings. But cutting costs can’t come at the expense of reducing the effectiveness of warehouse operations. As you focus on the details in order to find savings, you can’t afford to take your eye off the big picture of ensuring your warehouse continues to meet the needs of your business.

Here are some of the main elements that can contribute to the costs of your warehouse:

• Storage Space
• Labour Costs
• Operational Costs
• Efficient Inventory Storage Costs
• Material Handling Costs
• Handling of Goods (both receipt and dispatch)
• General Administrative and Management Expenses
• Operational Expenses
• Security Costs

Our experience tells us you need to begin by looking not at each individual element, but by considering the needs of your customers. It’s by satisfying their needs that your business will grow and thrive. The next question is how to achieve this as effectively as possible, while running a highly cost-effective operation.

How this is achieved will vary from one business to another. Your combination of customers, suppliers, products and location is unique, or almost. Add to that your overall business strategy and there’s no one else quite like you in the market. While your warehouse operations may be similar to those of others, they won’t be identical.

That’s why it’s important to have a holistic view of your warehouse operating costs. We help our clients achieve this perspective and find ways to operate more profitably.
This guide contains a number of specific approaches to cost reduction. However, as you consider these, it’s important to keep the big picture of your business aims in mind.

Improvements To Warehouse Operations

Your warehouse operation comprises a host of processes, each of which can be analysed and improved. Receiving, sorting and slotting, picking and packing – all these and more are opportunities for boosting efficiency.

Slotting is particularly important. It’s the process of ensuring the right products are in the right place at the right time, by positioning and grouping stock to optimise the picking process. Excellence in slotting means less errors and higher productivity. This in turn helps you to keep customers happy through your service and your pricing.

Automation can help with many of your warehouse operations, particularly those involving the movement of goods. Conveyors, autonomous mobile robots (AMRs) and automated guided vehicles (AGVs) can often move stock faster, more efficiently and with less risk of loss or damage than human labour. The use of sensors, lights, and wearable technology can considerably enhance the productivity of your operations – both the robots and the people in your team.

Not all operational improvements require detailed analysis or digital tools. Something as simple as clear, accurate labelling and signposting can make a small but measurable improvement in performance.

Benchmarking is a valuable tool when it comes to making warehouse operations more efficient. This means identifying the practices and performance that best contribute towards achieving your business goals. You can then measure against these, and find ways to improve.

Optimising Your Storage Space

Instead of paying for more storage space, you can save money by optimising your existing space. Land cost is one of the biggest expenses warehouse owners have to account for. Whether you’re renting or if you own your property, the larger your warehouse is the more it will cost. However, having a warehouse with a larger space may not be cost-effective.

A more profitable solution when controlling warehousing costs may be to optimise your storage space through pallet racking, shelving, slotting and intelligent warehouse design, which are popular storage solutions for those streamlining warehouse processes and keeping skyrocketing inventory costs to a minimum.

As part of your process of creating more reliable warehouse operations, you can incorporate aisles that make navigation easier for staff, whether they’re on foot or operating machinery. Not only do they optimise storage space, but they also allow staff to locate goods faster and more efficiently, which will help with inventory management as well as overall warehouse management and reducing costs.

Pallet racking is the best way to optimise your existing space while reducing warehouse costs. Racking utilises vertical space and increases the square footage available to use for pallets.
Depending on how high the storage system climbs in your warehouse, you may need to use a forklift to load pallets onto the racking. You can also automate the stacking and picking process using machinery.

There is a wide range of pallet racking systems available, ranging from double-deep racking that allows you to store pallets two-deep on a single shelf, to mobile racking that you can move using a remote control to reduce how many aisles you need.

Reduce Labour-Related Costs

Operational efficiency isn’t only about optimising storage space, you should also optimise your staff’s processes, in order to achieve maximum warehouse productivity and minimise warehouse costs.

Increasing the productivity of your team reduces labour costs, as they can achieve more in less time.

For example, assigning staff a specific area to pick items from reduces time spent walking between different sections of the warehouse, which also improves operational efficiency, which will then have a positive effect in terms of speed and efficiency through the entire supply chain process. During working hours there should also be as little dwell time as possible. Having a set process that shows staff tasks they can complete while waiting for a delivery to arrive is a productive solution for an efficient warehouse management system.

Automating repetitive processes can also reduce long-term labour costs. Today’s robotic systems allow machines to take on a wider range of activities once performed by people.

Controlling labour costs isn’t just about managing the number of people you employ. It also involves employee retention – keeping your best and most experienced employees for as long as possible. It costs less to continue paying the salary of an existing team member than to hire and train a new person. Investing in staff training that focuses on productivity can help keep your team motivated, and help you improve your operational efficiency and can increase long-term profits.

Make More Use Of Cross Docking

Cross docking – where your supplier delivers goods that can be shipped immediately to customers – offers obvious opportunities for savings. There’s minimal requirement for storage or handling.

For cross docking to be as efficient as possible requires a dedicated facility and processes. It also needs planning and management, to minimise time when the dedicated space is idle and to avoid periods of excessive demand. Planning also needs to account for stock that will need short-term storage, and that which can be delivered to be immediately shipped out again.

Not all products are suitable for cross docking. Those that are include high value items where you trust the packing and quality controls of the supplier, along with perishable items and pre-packaged individual orders for your customers.

Cross docking is an example of a cost-saving strategy that can have unintended consequences. Because you have minimal engagement with the goods, you are relying on your supplier for providing inventory that will meet the standards your customer expects. Ensuring this requires good communication with your supplier, along with your own inspection processes during the cross docking.

With the right procedures and systems in place, cross docking can help reduce costs in your warehousing operation.

Reducing Energy Costs

Energy costs have increased massively in recent years. Firms have seen their gas and electricity bills soar, and while the rate of increase has slowed, it’s increased the appetite for becoming more energy-efficient in order to remain competitive.

Fortunately, there are many different ways in which to reduce the level of energy required to heat, light and power a warehouse. These include:

• LED lights
• Designs that maximise natural light
• Installing solar panels
• Motion sensors to activate lights only when required
• Installing insulation
• Better temperature regulation

In most warehouses, lighting is the single largest use of energy. The simple tactic of putting up posters that encourage staff to turn off unnecessary lighting can make a difference. However, a more comprehensive strategy of automation, low energy bulbs and only lighting areas when necessary will be much more rewarding.

As robotics become increasingly common in warehouses, it’s important to consider their energy requirements and usage.

Regular energy audits will help you stay in control of energy use. They help you to pick up on changes in process and behaviour that have an impact on lighting and heating costs.

Review The Equipment In Your Warehouse

Warehouse equipment purchases can take out a large chunk of your budget – ensure you maintain effective warehouse inventory management of your tools and machinery as well as of your stock and supplies.

When optimising your operational processes, consider whether you need to invest in an upfront purchase for equipment. If you don’t use the equipment regularly in your warehouse, it’s more cost-effective to hire the machinery as and when you need it. For any equipment you use every day, if possible, you should make sure it has multiple uses to give you maximum value for money.

You should also look after your equipment. If you don’t regularly maintain machinery, it could stop working, or worse, break while in use causing a safety hazard. When equipment experiences wear and tear, this shortens its lifespan, so you may need to replace it sooner. With regular maintenance, you can increase the equipment’s durability and extend its life removing the need to pay for expensive replacements.

Reduce Stock Loss From Damage and Theft

Moving and storing goods exposes them to the twin risks of theft or damage. Staff can find the presence of so much stock just too tempting, or they can lose concentration when moving items and injure packaging, or the goods themselves. Some loss is inevitable, but it should never be acceptable, because it eats away at profits.

Automation can help to solve both problems, as it reduces the risk of human error and reduces the access to stock. However, machines can also cause damage. Where this occurs, processes should be reviewed to identify what has gone wrong and how it can be fixed.

Good communication across your team can also help. Staff are encouraged to report opportunities to prevent damage or theft, and reporting mechanisms highlight unexpected situations, such as consistent errors in certain stock levels. In a well-managed warehouse environment any anomalies should be quickly picked up on, giving time to be investigated.