Warehouse Optimization- 9 Tips to Cut Costs and Increase Efficiency

Warehouses manage incoming inventory procurement, order fulfillment, and outgoing customer shipments, requiring a harmonious workflow of interweaving operations. This can be challenging without proper supply chain, inventory, and operation management.

By prioritizing warehouse optimization, companies can maximize their storage and workspace to streamline internal processes and encourage expansion.

What is Warehouse Optimization?

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Warehouse optimization involves integrating operations to ensure businesses can efficiently receive, fulfill, and ship orders. In order to achieve warehouse optimization, companies must determine the most cost-effective way to order and stock inventory to streamline ordering picking while providing the best customer service.

There are two elements to warehouse optimization - the supply side and the customer side.

On the supply end, businesses must adequately manage lead times, inventory, product flow, logistics, and deliveries. From the customer's perspective, companies must meet delivery deadlines, honor returns and refunds, and promptly resolve any issues that arise.

Although warehouse optimization requires attention to detail and extensive research into internal operations, it can improve warehouse workflow by-

  • Improving order fulfillment accuracy
  • Enhancing planning and forecasting
  • Increasing customer retention
  • Increasing customer satisfaction
  • Improving staff scheduling

9 Tips for Warehouse Optimization

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Companies can optimize warehouse performance by using the best practices, from reorganizing their layout to extending their supply chain network. To begin the optimization process, warehouses should-

1. Create a Layout that Reduces Travel Time

The longer it takes employees to navigate their way through the warehouse or distribution center to find items for customer orders, the longer the lead times will be. Therefore, businesses should keep popular and time-sensitive inventory near the order fulfillment station to reduce travel time during the picking process.

2. Design a Floor Plan that Allows Room for Growth

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Many organizations make the mistake of choosing and organizing a facility that only caters to their current needs. This can raise issues when the company begins to outgrow its warehouse, requiring operations to temporarily halt in order to reorganize.

Instead, warehouses should design a layout that meets their current needs while leaving extra space for future expansion. This includes-

  • Limiting clutter
  • Widening aisleways
  • Utilizing shelf space

3. Understand Staffing Requirements

Businesses should understand precisely how many employees are required to perform internal operations, from restocking items to supervising workers on the floor. Too many workers can increase labor costs, limiting the bottom line. On the other hand, understaffing can lag systems, increasing lead times and overworking employees.

By understanding staffing requirements, companies can correctly allocate employees to streamline internal processes while minimizing labor expenses.

4. Use Multiple Shipping Providers

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Regardless of a company's order fulfillment efficiency, shipments can be delayed if distributors are unable to meet the demand. Relying on a single shipping company can also cause problems when they are overbooked by other warehouses, which can elongate delivery and customer wait times.

By partnering with multiple shipping providers, businesses can ensure they have alternative options if their primary distributor falls through. This also provides customers with different pricing and shipment options.

5. Optimize the Logistics Network

A logistics network includes all of the businesses, from suppliers to shipping companies, required to provide goods and services to customers. This involves intricate planning to ship items between warehouses, distributors, and retailers, which can quickly become overwhelming.

By optimizing the logistics network, companies can determine the minimal number of warehouses needed to fulfill the requirements of their unique supply chains. To achieve this, businesses should focus on their procurement, supply, and sales needs.

6. Study Inventory Turnover Rates

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Warehouses should be organized based on inventory turnover rates to streamline order fulfillment, cycle counts, and restocks. Fast-moving stock should be stored close to fulfillment workstations to reduce travel times, whereas slow-moving items can be stored in the back of the warehouse.

By considering inventory turnover rates when designing the warehouse layout, businesses can-

  • Optimize storage space
  • Reduce inventory damage
  • Improve operational safety
  • Improve flexibility
  • Establish efficient material handling methods

7. Remove Excess and Stagnant Inventory

Filling storage space with unwanted inventory can lag warehouse operations and impact the bottom line. Removing excess and stagnant inventory frees up valuable warehouse space for fast-moving and high-profit items, increasing cash flow and profitability.

8. Implement Cycle Counts

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Cycle counting is an excellent alternative for end-of-the-year inventory audits, which often require businesses to stop operations to manually tally their inventory.

With cycle counts, the warehouse manager can intermittently record individual sets of inventories during operating hours. This way, warehouses can maintain workflow while reducing labor costs. Businesses can also gain a more accurate picture of inventory availability while reducing order errors.

9. Utilize Inventory Management Software

Using manual methods to take inventory can result in costly errors, such as miscounting, miscalculations, and using the incorrect unit of measurement.

With warehouse automation, such as inventory management systems, businesses can automate cycle counts with barcodes and scanners, eliminating human error and minimizing the time it takes to count stock. Management software also improves data collection for detailed analyses on each item to improve ordering strategies and stock allocation.