Warehouse Cost Reductions: 3 Understandings Driven by Inventory Management & Lean Principles
Maintaining inventory management and control through lean principles is a major trend through warehousing. Across the spectrum of warehouses and distribution centers, these practices play a vital role in driving warehouse costs down. Through continuous improvement and dedication to lean warehousing, including just-in-time inventory management, warehouse managers can effectively achieve significant warehouse cost reductions. Primarily, these reductions are achieved through an understanding of the top-level benefits in effective inventory management and lean principles.
Effective Inventory Management Reduces Tangible and Non-Tangible Waste.
Many managers and employees may isolate waste to physical factors. For example, using too much packing material when a smaller carton would suffice. However, the greatest costs in warehousing reflect non-tangible resources, reports Evan Fleishacker.
Time, energy, opportunity cost and space impact overall costs in your warehouse. Spending too much time on a pick ticket can lead to lower profit margins, and unnecessary, repetitive movement by workers can result in premature fatigue and fewer fulfilled orders. Meanwhile, rework and returns eat away at profits too. But, a company can mitigate and reduce these costs by implementing a lean, effective inventory management system.
Lean systems use data to define and optimize existing inventory levels. Moreover, these systems enhance current workflows, including receiving, slotting, picking and packaging, to promote faster product flows.
Optimal Product Flow Enhances Warehouse Cost Reductions.
While considering product flows, it is important to remember how individual product flows impact warehouse costs. Sudden releases of pick tickets, otherwise known as “waves,” might seem ideal, but it can lead a constant feast-or-famine attitude among workers. Labor costs soar during lulls and become superior during peaks. Yet, proper inventory control can address this issue too.
For instance, waves may result from companies that are stuck waiting for inbound products and other vendors to arrive. However, inventory control systems in this model lack integration and standardization. In other words, inventory control begins with vendors and ends with consumers. As a warehouse or distribution center, your company needs to act as a bridge between the two ends of the product flow. This means integrating your systems with supplier and consumer systems, which provides more data for better, more accurate fill and replenishment rates in your supply chain.
Bridging the divide also helps promote the use of order streaming, allowing pick tickets to continuously flow in a manageable, controlled fashion. Therefore, team members can be more productive and achieve stability.
Lean Principles Require a Warehouse-Wide Effort.
An effective program for achieving warehouse cost reductions must also consider the lost opportunities in your warehouse. For example, is there a standard system in place to manage the slotting, reslotting or reorganization of items stored in your warehouse? If not, your overhead costs could be climbing. Yet, reslotting is not a simple task.
Reslotting or slotting optimization must have company-wide support. All team members, ranging from those working in picking to those in packaging, must understand the need to identify issues. While automated systems help this process, your team is another inexhaustible source of information about issues or delays that arise. Ask for their feedback about current slotting or picking trends. This will also help gain their support as your company implements new systems to gain better inventory control. Also, invest in training and certification programs for your team to help boost employee satisfaction and reap cost savings, reports Chuck Intrieri via Cerasis.
The Big Picture.
True warehouse cost reductions can seem difficult to locate. Considering the growing number of products available on the market, your warehouse needs cut costs where possible and improve productivity. Fortunately, lean principles and effective inventory management systems, like an integrated warehouse management and execution system, can make the process easier and provide real value to your organization.