Supply Chain Expert Insights: Reducing Costs Around Your Warehouse

Mike DeFabis
Outside of the IDS Fulfillment Center

One of the most commonly asked questions in the ecommerce and fulfillment industry is: how can I remove unnecessary costs from my warehouse? There are answers everywhere, but how do you know which ones are right and which ones are leading you astray? Fortunately, after some digging, we have been able to compile a list of what we believe to be the most effective cost saving strategies.

Managing Labor: This may seem like the most obvious answer, but it is actually quite difficult to know where in your labor you can cut some things back. One way to do this is to integrate automation into your system to work alongside your employees. By doing this, labor costs can drastically be decreased, and your processes will run more smoothly. You can also limit the amount of employees you have by focusing on cross-training to keep your employees stimulated while keeping the costs of extra labor down. Other proven successful labor cutting techniques include: monitoring time cards, implementing a rewards program for those who go above and beyond, monitor individual productivity, revisit your labor strategy, and consider adding a “comment box” for your employees to leave you feedback on their concerns. A comment box not only gives the employees a chance to be heard, it also allows you to see what could be going wrong from the point-of-view of the people on the front lines.

Managing Operations: Your operations are the backbone of your entire company structure. Keeping everything running smoothly is essential in keeping the costs of your warehousing operations down. One major key in reducing costs in operations is keeping track of and reducing the amount of errors and returns. This will not only improve the overall quality of operations, but will make keeping costs down much easier. Begin by collecting data on error rates and highlight where the faults are. From there you are able to determine a strategy and correct as many problems as possible. You will also need to focus more on optimizing space within the warehouse. The cost of land is one of the largest contributors to costs in warehousing. Look into the cost-per-pallet stored to be sure space is being optimized correctly. Check the types of racking within your warehouse to utilize the height of your warehouse. Finally, look at aisle space and make sure you have the right equipment to optimize space. Those are the two most important factors in managing your operations costs, but others include: controlling theft, minimizing packaging, keeping managers on the warehouse floor, and keep the importance of house keeping in mind.

Technology and Automation: Technology and automation are an ever-increasing trend in the ecommerce fulfillment industry. There is research all over the internet about how implementing automation and new innovations can save you money, but which one are the most cost effective? Always consider updating and constantly looking at your Warehouse Management System (WMS). If you are not using a WMS at all, you will find it very difficult to reduce costs. Use Electronic Data Interface (EDI) to communicate with your customers and suppliers. When it comes to your picking and packing, technology and ROI automation are the most useful strategies. You can implement voice-directed or light picking systems. The most common form of picking automation is the use of conveyors to move picked items from one area to another. This decreases foot traffic and allows you to get your items down to your packers quickly. Conveyors are the most common and one of the most cost effective forms of automation. Another commonly overlooked automation you can implement is automated billing. This doesn’t seem like something you initially need to consider, but for a 3PL warehouse automated billing can drastically reduce your costs and keep all of your payments up-to-date.

These are what we believe to be the most important factors in reducing costs around your warehouse. As there are hundreds of ways to eliminate unnecessary costs, it can be intimidating to determine what to do. For any more guidelines, or if you have any questions on reducing warehousing costs, contact IDS to speak with an expert and gain more insight.

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