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5 Foundations of a Successful & Profitable Warehouse Operation


March 25, 2021
7 MIN READ
Vinculum
Written by:
Vinculum
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Introduction:

A warehouse always seems like such a simple concept – “they store things, and then maybe sort them, pack them, deliver some of them – pretty straightforward”. Isn’t it what you thought before? However, as you start building one, or in this case operating one, you find there’s a lot of skills necessary for creating and maintaining a facility that allows for a smooth and seamless warehouse operation.

Changes of a Successful Warehouse Operation:

There are many factors that go into building a successful and profitable warehouse operation. If you don’t start with the basics, it can be very difficult. Not only do you have to maintain the physical appearance of the space itself, but also ensure you are providing the most efficient services possible for our clients.

The idea here is that you want to be equipped with both an exceptional customer experience and a flawless process for how those experiences are received. Warehouse success is a direct result of creating efficiencies while maintaining profitability. That’s why the five foundations of a successful and profitable warehouse are: Customer Service, Efficiency, Automation, 3PL Partnership and Speed to Market.

Let’s face it. Running a warehouse or manufacturing operation requires a constant balance of managing inventory, performance, complexity and more. Warehousing, fulfillment and shipping is not the most glamorous side of e-commerce. Not all warehouses are created equal, and the foundation of your distribution operation could be affecting your bottom line.

How to Run A Profitable Warehouse Operation Successfully?

Wholesalers, distributors, direct-sales companies, drop-shippers and e-commerce merchants are all faced with the challenge of making their warehouse operations profitable. Planning, Preparation, Performance, Profitability. These are the essential elements of a successful warehouse operation, and if you let any one of them fall below your standards, you’re going to have a hard time making money in warehousing.

Whether you have a $1 million or $100 million operation, no matter the size or type of business, there’s no doubt that building a profitable operation is critical to its success. But putting in place a well thought out plan for your operations can be profitable for your business.

As warehouses become more complex in today’s retail environment, e-commerce warehouse management solutions are taking center stage—and rightfully so.

Here are five strategies that are foundational to the long-lasting success of your warehouse division:

Operation Efficiency

Being a crucial part of the supply chain, success of a warehouse depends on its role of receiving, storing, and shipping products to the right customer at the right time in the right quantities. It’s not a hard quest to understand, really — when you move goods quicker and more efficiently, you get to the customers sooner and everyone wins.

However, this is a battle against the sun. More than half of wasted time in warehousing operations is lost due to human errors. And while improvements in technology have helped warehouses become more efficient, most warehouse operations are still run by humans who are prone to human error – which can lead to inaccurate shipments and lost revenue.

Maintaining accuracy at all times is not as easy as it sounds and many warehousing businesses are turning to barcode scanners, WMS (warehouse management systems), and RFIDs for help. As a solution, these technologies can give you the confidence to know that what’s being shipped and help warehouse operations increase their accuracy.

Cost Efficiency

When someone says “cost control,” that could mean a lot of things at the warehouse level.
Let’s focus on the three major costs warehouse managers are concerned with: labor, storage, and utility. These three costs combined can reduce a company’s profits if they aren’t kept in check.

  1. Storage costs can have a significant impact on the profit of your warehouse operations. This cost includes buying or renting a warehouse in order to store products. Most businesses have been forced to seek smaller warehouses over the last few years, due to the rising cost of storage space. The cost per square foot per year in the US can range from as low as $2.64 SF/Year and as high as $11.16 SF/Year based on location.
  2. Labor cost is perhaps the second-largest operating cost within a warehouse. Labor costs are referred to the costs related to the job role, skill set, and geography (location). According to the US Bureau of Labor Statistics, the median pay of a warehouse clerk is as big as $28,710 per year/$13.80 per hour.
  3. Equipment & Utility cost: Apart from storage and labor, these two costs also figure on top of the list.

Cost inefficiency within a warehouse operation is arguably one of the most difficult to detect and correct. However, by determining the costs associated with these core activities and following well-planned strategies to reduce or control these costs, managers can keep operating costs stable and in some cases reduce their spending.

In a bid to save costs, business owners continually look at ways of improving their processes, automation and productivity. Investing in good warehouse management systems, deploying automation etc. also helps in reducing these costs as we have discussed in our previous blog- Warehouse Digitalization: The Warehouse of Tomorrow.

Technology & Automation

At the core of running a successful and efficient warehouse lies in the advancement of technology.
Technology is what we have to make work easier for our warehouse operators and save them valuable time.

  1. Warehouse Technology can help you collect all the data that is generated from your logistics network and store it forever in one place, as well as make it accessible anywhere in the world.
  2. Warehouse technology specifically refers to automated storage and retrieval systems (AS/RS), robotics used for replenishment (carton flow, item flow, pallet flow, picking, packing, shipping labelling, and so on), and any other type of application within an inventory environment.
  3. Warehouse technology also encompasses technologies used in the warehouse environment such as warehouse management systems (WMS), barcode and radio frequency identification (RFID) technology, conveyor control system, and the material handling equipment itself. Warehouse technology is important because it provides an actionable solution to streamline operations in warehouses that have a high volume of activity and traffic, which is necessary for increasing overall green and sustainable manufacturing practices.

Process efficiency

Warehouse optimization is not a once and done process. It’s not necessary that one process needs to be fit for all the cargo or vice versa. The differences between individual goods start from the very moment they are received. Every piece has a different origin, destination, and set of conditions in which it is transiting through your warehouse. Cargo concerns also differ by region, transportation type, customer account structure, etc.

As per research, warehouses that define, document, review, and optimize their processes properly once per year are more efficient than their other counterparts.

Health and safety:

Warehouse health and safety is about minimising the risk of harm being caused to warehouse employees. Despite the costs, time and resources which are expended on health and safety, many warehouses have been found in breach of health and safety regulations.

Warehouse safety must be taught to each and every employee, no matter their level of experience. By taking safety precautions necessary, you are not only protecting your employees, but also your warehouse itself.

Final statement:

However, one of the most practical ways to run a successful warehouse in eCommerce is through the steps of defining priorities, the pillars, the processes and procedures of effective inventory management. Without this basic system, you will spend more time problem solving instead of concentrating on adding value to your business. The above five foundation tips will help you kickstart your business on the right foot.

Reach out to us at www.vinculumgroup.com to understand more about Vinculum and how our products can help you increase efficiency and optimize your warehouse operation.

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