Overview
- Categories of Warehouse Costs
- Easy Steps for Reduced Warehouse Costs
Categories of Warehouse Costs
All warehouses have the same elements that add to their costs. Reduced warehouse costs come from understanding these elements. Further, an increase in productivity also leads to reduced warehouse costs. To understand how to reduce warehouse costs, know where expenses come from. Then, you can see where you can improve. In general, there are four types of warehouse costs.
Handling
Handling refers to any expense associated with moving products. In this category, labour is usually the highest component. This includes receiving, put-away, order selection and loading. Additionally, refurbishing or repackaging damaged goods. Equipment being used also adds to handling costs. For example, machines, electricity and fuel. Any ‘goods in motion’ fall under this category.
Storage
Storage could greatly help reduced warehouse costs. Storage costs come from products at rest. As such, these costs exist even without movement. Storage is mostly expressed as a monthly cost. When an entire building is used, storage expenses are the total occupancy cost for that warehouse.
Operations Administration
These expenses are for the operation of the distribution centre. This cost includes things like line supervision, clerical effort, information technology, supplies, insurance and taxes.
General Administrative Expenses
Administrative expenses refer to costs for general management and staff. Some warehouses choose whether or not to allocate for these expenses.
Improved Productivity and Efficiency for Reduced Warehouse Costs
Inefficient operations could lead to fewer customers. Studies show that there is a positive link between customer retention and warehouse efficiency. Inefficiency leads to delays which cause companies to lose customers.
Inefficiency basically leads to long waits. This makes customers turn to your competitors instead. Additionally, inefficient operations lead to wasted labour. There is an average of 6.9 weeks in wasted motion for some warehouses.
In the long run, this will affect your costs. Not only do you lose customers, but your company also continues to spend on inefficient practices.
Easy Steps for Reduced Warehouse Costs
Optimise Storage Space
Space optimization is important in warehouse management. It is also crucial in avoiding many types of waste in your warehouse. Additionally, more customers are shopping online. Businesses now provide more varieties of their products. As such, the need for storage space also grows. Some have tried to open secondary locations, but this only added to their costs. For reduced warehouse costs, optimise the space you have.
Improve Pick and Pack Processes in Your Warehouse
Improvement comes from simplifying warehouse processes and procedures. Aligning processes makes sure they work optimally and increase warehouse efficiency. Picking and packing are two of the 7 fundamental warehouse processes. In fact, picking accounts for roughly 60% of labour costs. As a result, implementing a warehouse management system helps. When integrated, a WMS records all product data and its location. Further, the system directs new products when they arrive in the warehouse.
Upgrade Technology in Your Warehouse
Technology and automation improve efficiency and productivity. Then, this all equates to reduced warehouse costs. In 2018, automation was expected to double for the next 3 years.
This is a smart investment for businesses. Aside from barcode scanners, tablets, smartphones and cloud storage have become a part of automation. For example, sorting systems and conveyor belts decreased injuries and increased throughputs in warehouses.
Inventory and Stock Replenishment
When warehouse operations grow, managing inventory gets harder. This costs more for the company in two ways:
- Overstocking leads to waste products or inventory that doesn’t move
- Understocking causes out-of-stock and losing customers
Inventory management systems are specifically designed to help with these problems. The system automatically replenishes inventory when levels are low. Setting maximum inventory caps is also possible to avoid overstocking.
Every improvement helps to achieve reduced warehouse costs. It might be an expense in the present. But it is also an investment for the future. There are many solutions that could help your company. Not sure which is the right solution for you? Contact Qbasis today!
