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Warehouse optimization: More cost-effective through correct storage management

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Warehouses are the core element of the supply chain and play a crucial role in the storage and shipment of products. Many companies experience stock-keeping as a huge expense in the day-to-day running of their business. On top of that, the stored products also tie up a lot of capital. This is why, in today's competitive business world, efficient warehousing and the associated warehouse optimization is crucial to the success of companies.

Well-organized warehousing can not only reduce costs, but equally increase customer satisfaction and improve the business efficiency. In this article, you will learn different ways to optimize inventory and understand why it is so important for businesses.

What are the work responsibilities in a warehouse?

A warehouse, also known as a depot, is used to store materials and merchandise. These materials and items are needed at a later date and must be available for future use, such as retail. Warehouses may include entire buildings as well as individual spaces and play a central role in business operations.

There are three main working areas in a warehouse:

1. The receiving department

The receiving department of the warehouse is responsible for the inspection of incoming products. In this way, wrong deliveries or the acceptance of damaged goods is avoided. It is also necessary to check whether there is an actual order for delivery. This is done by the company's merchandise management system, which displays the orders with delivery quantities and dates.

The duties in the warehouse can be described as follows:

  1. Checking the delivery documents
  2. Merchandise inspection based on the delivery slip
  3. Product control regarding damages
  4. Delivery quantity control

2. The storage

Warehousing is a complex process that requires good organization by qualified employees. Therefore, it is important to recognize potential problems in time and reorder merchandise if necessary. In addition, smart warehousing strategies consider the current price situation for the merchandise. When prices are low and higher margins can be achieved, then speculative warehousing can be considered, even if it involves increased warehousing costs.
To add to this, depending on the type and nature of the merchandise, processing or remodeling duties may be required, such as rebottling, repacking, or mixing merchandise in order to offer a wider range of products.

These are the storage tasks in detail:

  1. Keep the merchandise in the right place
  2. Pay special attention to hazardous substances, expiration date, temperature and humidity
  3. Merchandise inspection
  4. Processing of orders
  5. Converting or refining orders
  6. Speculative orders
  7. Inventory

3. The distribution of merchandise

When the goods are delivered, you can see whether the receiving and storage tasks have been successful. Three questions arise here: Is the product quickly found, is it undamaged, and is it the correct merchandise for the buyer? Furthermore, the goods must be packed and labelled. The delivery bill or invoice can be enclosed with the merchandise, as well as sent by e-mail or post.

These are the tasks related to the delivery of merchandise:

  1. Locating the purchased merchandise
  2. Provision of shipping label, invoice, and delivery slip
  3. Supply of the merchandise

Why is warehouse optimization so important?

Inefficient warehouse optimization has a far-reaching impact on various business areas, including sales, customer service and day-to-day operations. For the simple reason that the
warehouse connects supply and demand.

If the warehouse is not kept tidy and organized, there may be delayed deliveries and even an increased risk of injury to employees.

While warehouse optimization is time-consuming and costly, the annual financial loss due to incorrect deliveries, returned merchandise, shortages, and human error is substantial.

To restructure the warehouse, implementing an inventory management strategy ensures better utilization and leads to a much more effective management of the storage space. And by labelling items with barcodes, it is possible to track every process in the warehouse and increase transparency. Ultimately, all warehouse optimization efforts will lead towards increased efficiency in the entire supply chain.

Four tips for warehouse optimization

When the customer's requirements change, sales volumes fluctuate and the assortment of products varies, it becomes absolutely essential to optimize the warehouse. Maintaining a perfect supply quality and staying competitive requires companies to constantly review and adjust their business structures and processes

There are various methods for warehouse optimization, but the main goal is to optimize inventory and logistics in order to respond efficiently and aggressively to the ever-changing market demands.

Below you will find four useful tips for warehouse optimization:

1. Supplying smaller and more consistent quantities

If the warehouse is too large, it results in tied-up capital and higher occupancy costs than necessary. However, inventory costs can be reduced if the time between receiving and delivering merchandise is shortened.

Another way to reduce costs is to negotiate with suppliers to order smaller quantities of merchandise regularly. Alternatively, you can arrange so-called just-in-time delivery, which makes it possible to reduce minimum stock levels without creating shortages in the event of sudden supply fluctuations.

By introducing a standardized delivery, you have another opportunity to reduce costs. By setting specific time slots for delivery (and if your customers accept pickup), you can optimize manpower and reduce costs. A well-organized delivery system will help to make your warehousing more efficient and ensure that everything runs smoothly.

2. Optimized expense distribution

It is wise to evaluate the optimal distribution costs. In the average euro pallet warehouse, 20 percent of the costs arise from conveyor technology and racking. The buildings and manpower are responsible for 40 percent of the expenses each.

Therefore, reviewing the current expense distribution is advisable. If there are significant discrepancies, then the corresponding items should be checked and, where possible, potential savings sought.

3. Efficient product placement

You should place frequently used items or inventory components, known as “fast movers,” at the beginning of an aisle to increase efficiency in your warehouse. This way, they are easily accessible and faster picked. Special storage areas should be reserved for rare special sizes that deviate from standardized packages or compartments to optimize storage.

If certain storage areas are difficult to access, for example due to pillars in the aisle, it may be useful to use them only as an emergency backup to improve accessibility. Modernizing the warehouse is a good idea when necessary, such as adding higher racks or new conveyor vehicles. All of which can often be more cost-effective than renting a new space.

4. Warehouse optimization with the right IT solution

It is possible to significantly increase the administrative effectiveness by using modern technologies, such as warehouse radio communication, in a larger warehouse. During this process, information about the storage or retrieval of new merchandise is transmitted directly to the central computer, which automatically posts the updated inventory.

Thanks to the use of IT, it is possible to realize more sophisticated warehouse operations effectively.

Industrial pneumatic tube systems can be used in large warehouses to transport smaller items. With this, you can transport sensitive and vulnerable items of all sorts from A to B. Even hot metallic steel samples are no problem for our special metal pneumatic tubes.

The industrial pneumatic tube systems are simple, fast and cost-efficient, supporting your large-scale operations by accelerating production processes and reducing the required number of employees to achieve the same production output. With a payback period ranging from one to three years, you are assured of a return on your investment.

Conclusion – Simple solutions for warehouse optimization

A state-of-the-art warehouse is very important for a large company, as it remains competitive by saving money. Therefore, it is highly advisable to undertake extensive warehouse optimization. Although this may seem time-consuming and costly at first glance, in time it reduces expenses and accelerates business processes.

Efficiency and speed – this is also the motto of Air-Log – your provider for individual pneumatic tube solutions. Contact us for your warehouse optimization!

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