One of the trickiest elements of successful warehousing is the balancing act between warehousing and distribution. Understanding how this balance can best be achieved for your business is crucial to getting the best from your warehouse space. It’s difficult to get accurate figures for different budget areas post-pandemic as the market is changing so rapidly but it’s estimated that most small to medium sized retailers are spending around 11% of their income on logistics at present. That’s a substantial proportion of revenue, so getting storage and shipment right can save time, money and effort.
One way to begin is to work through best practice in these areas and at DMG Freight we’ve picked out the ten key rules to help you get the balance right.
- Develop Advanced Shipping Notifications
It’s surprising how many warehousing operatives are still relying on standard shipping and receiving systems, or even manual guesswork, to manage this area of operations. Finding an electronically transmitted advanced shipping notification system means that delays and disruptions are factored into warehouse activities, rather than interfering with them, The benefits here are that logistics can be adjusted more quickly, making them cheaper and that order fulfilment can be managed more effectively, ensuring that costs are kept as low as possible whilst ensuring that customers are kept happy, which is the ultimate goal of any distribution system.
- Define and Manage your Warehouse KPIs
It’s a business truism that you must measure what you need to manage. When it comes to warehousing and distribution, measurement has to be central to the process. Managers of warehouse space need to track key performance indicators such as:
- inventory accuracy
- inventory turnover
- Demand forecasts
Distribution managers may need to focus on such KPIs as:
- Order picking accuracy
- Customer rate of return
- Order fulfilment times
Combining these two sets of indicators can help improve performance and reduce supply chain inefficiencies.
- Look at Workplace Incentives
Because warehousing and distribution both tend to be high staff areas, there is a strong possibility to improve performance. The golden rule here is to create workplace incentives that increase productivity without reducing safety – developing bottom line improvements through using systems such bonuses and non-monetary incentives like praise and appreciation, travel, merchandise/swag, experiences and professional development opportunities.
- Enhance training for warehouse personnel
In any relationship, communication is essential and in warehousing and distribution, communication is vital to effective warehouse operations. When renting a warehouse, this becomes particularly important as familiarising employees with the warehouse space, with operations and processes and with KPIs are essential to getting the best from them. Consider improving training by offering pilot programmes, getting deep feedback from your trainees to see how you can improve training and ensuring that senior team members are regularly refreshed on the basic training so they know what new hires are learning – and what needs to be updated or altered.
- Establish your Inventory Turnover Rate (ITR)
By discovering your ITR you will be able to make better informed decisions about two things: stock levels and item pricing. There are several ways of calculating ITR, most notable Sales against Average Inventory or Cost of Goods Sold against Average Inventory (COGS) which is generally considered more accurate. Ratio of how frequently inventory sold and was replenished during a specific time period. A low ITR indicates poor sales levels and/or excess inventory whilst a high ITR may denote sub-optimum pricing which could be adjusted to improve profit margins.
- Implement a warehouse management system
Most warehouses have some level of WMS which can be as simple as an automated inventory process or as complicated as a fully integrated system that handles multichannel inventory automates fulfilment and so on. Whatever the level of sophistication you choose, WMS will improve inventory visibility, find dead stock, integrate systems with workflows to improve personnel efficiency and reduce volatility – the first two improve warehousing and the second two distribution. WMS can also be cloud based and software as a service (SaaS) which means that warehouse management can be a 24 hour process, just like sales channels!
- Develop lean warehouse management
- Which is just another way of saying eliminate waste and duplication from your warehousing. In every warehouse space there are several areas that can lead to duplication and waste, notably: over processing – having more stages to activity than are necessary
- excess inventory – wasting space and capital
- defective goods – poor storage, especially pallet storage can lead to stock damage
- poor movement – inefficient warehousing operations can waste time and money as well as managing stock
- waiting – weak processes lead to blockage points in a warehouse and can slow down distribution as well as running the risk of failing to fulfil orders appropriately.
Lean warehouse management identifies and eliminates any process that doesn’t add value to the warehousing space and its operations. This could mean reorganising warehouse storage to simplify movement through the warehouse or taking out duplicated systems such as order checking in more than one place in the distribution process.
- Explore movement logging
A step beyond lean warehouse management is movement logging – the process of logging every step in a process. Anything that can’t be logged (as in tracked or recorded) should be considered as either an unnecessary process or one that needs to be optimised. Unneeded processes can be eliminated from warehouse activity while other processes can be optimised, and therefore logged, to ensure that they add value to the warehouse and distribution system.
- Try Hands Free
Voice picking – where an operative in a warehouse setting receives order information through a headset directly from another member of staff or the warehouse WMS has positive effects on the warehouse to distribution relationship. It prevents the loss or misreading of paperwork and improves accuracy, although nobody really knows why, perhaps it just increases concentration if personnel don’t have to keep looking from paper or screen to shelving.
- Utilise sample audits and runs
Nobody likes an audit! Of course audits are necessary but they demand warehouse downtime and often the allocation of overtime for employees involved in auditing, which affects cost centers. Running sample audits and runs can test recording and stock tracking processes without having to engage an entire audit, giving you a clear idea how your warehouse is operating, without having to undertake a full audit.
- Consider cross-docking
It’s true that cross-docking is the ultimate in warehousing and distribution – and it does require a real commitment to streamlined processes and maybe to 24 hour operations. In a nutshell, cross-docking is the arrival of products from one transportation system directly to another without passing through the warehouse or required any storage or staging. It works best in food and fast moving consumer goods (FMCG) environments although fashion can benefit from cross-docking too and it can lead to significant cost savings if a high percentage of incoming inventory can be processed onwards without downtime.