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7 Innovative Strategies to Help Your Business Reduce Warehouse Costs 

Business Reduce Warehouse Costs SEQOS

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Imagine this: Organised shelves, a motivated workforce, happy clients and streamlined procedures that hum with efficiency.

A perfected warehouse operation is not a fantasy. You just need to follow the right guidelines. 

Luckily, this guide covers the most recent practices to future-proof your warehouse operation. We’ll explore new strategies that optimise space, empower your team, and minimise your environmental footprint. 

Let’s save your warehouse from becoming a liability and ensure it stays a strategic asset for decades.

It’s time to dive into our framework to reduce your warehouse costs. 

 

Understanding warehouse costs 

The distribution of warehouse operation and running costs typically varies depending on the size, type, and efficiency of the warehouse. However, here is a general breakdown of the percentage distribution of warehouse costs:

 

Business Reduce Warehouse Costs

 

Labour Costs (50-70%): This is often the largest expense and includes wages, benefits, and training for warehouse staff. Labour costs can vary widely based on automation levels, location, and labour market conditions.

Inventory Carrying Costs (20-30%): These costs are associated with storing inventory, including capital costs, storage costs, insurance, and depreciation.

Space Costs (15-20%): This includes rent or lease payments for the warehouse space, property taxes, insurance, and maintenance costs. These costs can fluctuate based on the location and size of the warehouse.

Equipment and Maintenance (10-15%): This includes the cost of purchasing, leasing, and maintaining warehouse equipment such as forklifts, conveyor systems, and automated storage and retrieval systems (AS/RS).

Information Technology (IT) Costs (5-10%): This includes the cost of warehouse management systems (WMS), software licenses, hardware, and IT support.

Other Costs (5-10%): These can include administrative costs, security, supplies, and miscellaneous expenses.

Utilities (5-10%): This covers electricity, heating, cooling, water, and other utilities required to operate the warehouse. Energy efficiency measures can impact these costs.

Having addressed the financial realities of warehouse operation, let’s cover our top strategies to help reduce warehouse costs. 

 

Strategy 1 – Using Smart Lighting Systems for Energy Efficiency 

Traditional warehouse lighting is often wasteful, especially in old warehouses. Smart Lighting Systems (SLS) have been proven more efficient. 

It utilises LED lights and sensors to create a dynamic lighting environment, automatically adjusting brightness based on occupancy, motion, and daylight. This innovative solution can significantly reduce energy consumption in warehouses. 

 A study showed a reduction of 43% to 80%. These savings translate to a 20% decrease in electricity bills for some warehouses, with a payback period of 1-3 years. Beyond cost savings, SLS also reduces a warehouse’s environmental footprint. 

Here are the steps you can take to be more energy efficient with SLS:

Step 1: Conduct a Lighting Audit. Assess your current lighting setup and identify areas for improvement.

Step 2: Consult an SLS Provider. Discuss your needs and explore suitable SLS options.

Step 3: Prioritise Occupancy Sensors and Daylight Harvesting. These features deliver the most significant energy savings in warehouses.

Step 4: Consider Additional Benefits. Explore features like task-based lighting adjustments for further optimisation.

Step 5: Calculate your ROI. Estimate energy cost savings and payback period for the SLS investment.

By implementing SLS, you can optimise lighting for both cost savings and task visibility in any large-scale facility. 

 

Strategy 2 – Optimising Warehouse Layout for Efficiency and Scalability 

Remember the scene in “The Founder” where Ray Kroc witnesses and assists the McDonald brothers in revolutionising their burger joint with an assembly-line style kitchen? 

Imagine that same drive for efficiency applied to a massive warehouse.  

Optimising your warehouse layout isn’t just about organisation; it’s about creating a streamlined flow of goods, just like the McDonald brothers did with their burgers. 

By strategically designing your warehouse layout, you can significantly improve efficiency, scalability, and your bottom line.

 

Reduce Warehouse Costs

 

Forget the maze-like layout slowing down your pickers and draining your profits. Instead, create a strategic space optimisation plan to make your warehouse more efficient:

 

Leverage Every Square Foot

  • Conduct a thorough inventory audit to understand your storage needs. 
  • Implement high-bay racking and shelving solutions to maximise vertical space utilisation. 
  • Analyse if you’re currently leasing unnecessary square footage due to inefficient layout.

 

Design Like a Pit Crew

  • Map your current picking routes and identify areas for improvement. 
  • Designate work zones based on product type and frequency of picks. 
  • Implement a picking path strategy that minimises travel time and backtracking for pickers.

 

Create a Flow, Not a Fray

  • Implement a visual management system like colour-coded zones for easy product identification. 
  • Streamline product placement by storing high-demand items closest to packing zones, bulky items on lower levels, and slow-moving stock in designated areas to minimise travel time and picking errors. 
  • Optimise vehicle flow by putting receiving docks near designated storage areas and position loading docks close to packing zones to expedite unloading, loading, and minimise congestion.

 

Bonus Tip: Consider integrating the SEQOS warehouse management system (WMS) to optimise storage space and increase overall warehouse capacity. 

This software allows for easy tracking and allocation changes, planning, and forecasting warehouse space needs like automated storage and retrieval systems, automated slotting and intelligent pallet racking. 

 

Strategy 3 – Implementing Automation and Technology with Consideration for Employees 

Another way to adapt to the evolving warehousing landscape is by integrating flexible automation that empowers, not replaces, your workforce.  

Automations like warehouse management systems should be seen as a tool to enhance employee capabilities, not as a threat to their jobs.  

Here are some ways you can use technology to boost employee morale:

 

Invest in future-proof automation solutions that empower your workforce

Choose modular or scalable automation systems like the Automated Storage & Retrieval System (AS/RS) that can grow with your business.  

AS/RS utilises automated cranes and gondolas to retrieve and store goods in high-bay racking, maximising your storage capacity and minimising wasted floor space.

These systems are modular, so you can add additional bays or units as your business grows, eliminating the need for costly warehouse relocations or expansions. 

Using AS/RS ensures your technology complements your long-term goals and frees up employees to focus on higher-value activities like quality control, complex order fulfilment, and data analysis.

 

Use WMS for Efficiency and Growth

Warehouse Management Systems (WMS) are the brains of modern warehouse operations. You can’t do without them. WMS can be custom-built for your needs or off-the-shelf solutions, which might be limiting. 

Off-the-Shelf WMS: Cost-effective and readily available but may require customisation to perfectly align with your unique workflows. 

Custom WMS: Tailored to your specific needs, offering maximum flexibility but requiring a higher upfront investment. 

 

Bonus Tip: Carefully assess your needs. If your operation has specific requirements, it might be good to invest in creating custom configurations based on your warehouse needs.

 

Manage the Transition

A smooth operational or software transition requires open communication and upskilling, so talk to your employees about the advantages of automation and how it can free them of menial tasks. 

Also, explain why they need to be equipped with skills to operate more systems so they can be of more value to the warehouse. Potentially even reducing their time on the tools. 

 

Strategy 4 – Material Handling and Equipment Upgrade 

The foundation is laid – a well-lit, efficiently designed warehouse with a team empowered by technology and automation. Now, let’s ensure you have the right tools for the job.  

Selecting the appropriate material handling equipment is crucial for maximising efficiency while considering both upfront costs and long-term return on investment (ROI). 

 

Reduce Warehouse Costs

Invest in Ergonomic Solutions

Ergonomic workstations are a cost-effective investment that pays off in reduced fatigue and improved worker productivity. 

It has been shown that there is a significant decrease in worker musculoskeletal disorders (MSDs) after introducing adjustable workstations and lifting aids. This resulted in a reduction in worker absenteeism due to injury and an increase in overall productivity. 

It might not be that noticeable, but adjustable workstations and proper lifting equipment minimise strain and discomfort, leading to a healthier and happier workforce. 

 

Leverage Smart Picking Technologies

Invest in scalable automation that empowers your workers. Implement smart picking technologies like barcode scanners, box sealers, strapping machines, and voice picking systems to minimise errors and boost fulfilment speed.  

For instance, investing in scalable automation like barcode scanners can empower your workers. 

Barcode scanners are the workhorse of warehouse automation. They use lasers to read unique item codes and ensure accurate picking.

This drastically reduces errors, improves efficiency by eliminating manual searches, and provides real-time inventory data for better stock management.  

They minimise picking errors and significantly speed up fulfilment. 

By embracing automation and empowering your employees with these tools, you future-proof your warehouse for success. 

 

Case Study: Cryosite 

Cryosite, a company specialising in logistics for clinical trials, faced challenges with its old WMS system. This included a lack of features for tracking changes and limited data privacy options, which resulted in manual work, errors, and slow order processing. 

SEQOS, a comprehensive warehouse management solution, migrated Cryosite’s data and configured the software for their specific needs.

SEQOS automated processes and ensured accurate tracking, eliminating errors, boosting productivity, and speeding up order fulfilment by 250%. 

Cryosite can now confidently manage clinical trials where precision and traceability are critical.  

SEQOS’ advanced features transformed Cryosite’s warehouse operations, improving efficiency, accuracy, and customer satisfaction. 

 

Case Study: Nike Japan 

A good example of a company that uses smart picking technologies is Nike. 

To streamline fulfillment and offer faster delivery options, Nike’s Japanese distribution centre utilises cutting-edge automation – known for being top of the line in the industry. 

This system, known as a GTP picking system, features autonomous robots that retrieve products and packages directly from shelves and pallets.

These robots then deliver the items to warehouse workers, significantly accelerating the order fulfilment process. 

This innovative approach to logistics has empowered Nike to offer same-day delivery to their Japanese customers. 

Empower your workforce and optimise your warehouse. Invest in smart equipment that prioritises worker well-being, streamlines workflows, and adapts to your growing business. 

 

Strategy 5 – Process Improvements in Order Picking 

Having a well-designed warehouse is only half the battle. Now, we need to ensure efficient movement of pickers throughout the space to maximise order fulfilment speed and accuracy.  

Reduce Warehouse Costs

 

Here are some innovative processes and actionable steps you can take to optimise this process: 

Batch Picking: Batch picking is a warehouse order fulfilment strategy that groups similar items from multiple orders together so that they can be picked at once. It was found that batch picking can reduce travel time by up to 55% and increase the pick rate by 40%.

Moreover, despite the increase in demand, productivity gains allowed the company to reduce its labour costs by 15%. Group similar orders for pickers to collect items in one trip, reducing travel time and boosting efficiency. 

Strategic Slotting: Slotting refers to the strategic placement of inventory within the warehouse. High-demand items should be positioned closest to packing zones, while bulky or slow-moving items can be placed in less accessible areas.

Place high-demand items closest to packing zones for faster picking. Use ABC analysis to categorise inventory and optimise storage locations. 

Optimised Pick Paths: Pick path optimisation involves designing designated picking paths that minimise backtracking and ensure pickers travel the shortest possible distance to fulfil orders.

Utilise WMS software to generate efficient picking routes that minimise backtracking and ensure the shortest travel distances. 

 

Strategy 6 – Reducing Touch Points and Handling 

Having optimised your warehouse layout, lighting, and technology, we can now unlock their full potential by focusing on reducing touchpoints.

Each time a product is handled, there’s a risk of error or damage. 

Studies show that minimising these interactions can lead to benefits such as 20% faster order fulfilment, improved accuracy (leading to fewer returns), and a safer work environment for your team. 

The optimised layout you designed plays a crucial role here. A well-designed warehouse naturally minimises travel distances and unnecessary handling. 

Let’s take it a step further with actionable strategies: 

Storage Optimisation: Implement a standardised bin and container system. Categorise your inventory based on size and weight, allocating appropriate bins for each category. This reduces individual item handling and ensures proper product protection.

Strategic Put-Away: During the receiving process, prioritise placing high-demand items closest to picking zones. This minimises travel time and reduces handling for frequently accessed products.

Leveraging Automation:  Explore options for automation that streamline material movement. Consider conveyor belts for high-volume picking areas or automated guided vehicles (AGVs) to transport pallets between storage and packing zones.

 

Strategy 7 – Cost-Efficient Transport and Distribution Strategies 

The journey to transforming your warehouse doesn’t end there. Optimising internal and external transport is crucial for cost reduction throughout your entire supply chain. 

Reduce Warehouse Costs

 

Here’s how a strategic approach to transport and distribution can benefit you: 

Analyse Traffic Flow within your warehouse and identify opportunities to minimise travel distances for picking and moving materials. Also, look out for traffic or bottlenecks around the off-loading and loading zones. Remember the importance of an optimised layout? Look for ways to leverage it for efficient internal transport as well.

Utilise Route Planning Software to figure out the most efficient and optimal delivery routes for your trucks to minimise travel time and fuel consumption.

Consider Expanding Your Distribution Network. Consider factors like strategically located distribution centres to minimise overall transportation distances and contribute to a more environmentally friendly supply chain. 

 

Bonus Tip: SEQOS also has transport management features that help optimise dock scheduling and carrier selection to minimise wait times and costs. Utilise load planning software to maximise truck capacity and minimise the number of vehicles needed for deliveries.

 

Summary – Final Checklist

By implementing the actionable strategies outlined in this guide, you can transform your warehouse into a well-oiled machine. 

Here is an actionable summary of what we have covered in our framework:

Strategy 1 – Implement Smart Lighting Systems for Energy Efficiency

  • Conduct a lighting audit to assess your current setup and identify areas for improvement.
  • Consult an SLS provider to discuss your needs and explore suitable options.
  • Prioritise occupancy sensors and daylight harvesting for significant energy savings.
  • Explore additional features like task-based lighting adjustments.
  • Calculate your ROI by estimating energy cost savings and payback period.

 

Strategy 2 – Optimise Warehouse Layout for Efficiency and Scalability

  • Conduct an inventory audit to understand your storage needs.
  • Implement high-bay racking and shelving solutions to maximise vertical space.
  • Map current picking routes and identify areas for improvement.
  • Designate work zones based on product type and frequency.
  • Use a visual management system with colour-coded zones for easy product identification.
  • Position receiving and loading docks strategically to expedite processes.

 

Strategy 3 – Implement Automation and Technology with Consideration for Employees

  • Invest in modular and scalable automation systems like AS/RS.
  • Use a Warehouse Management System (WMS) for efficiency and growth.
  • Manage transitions with open communication and upskilling programs for employees.

 

Strategy 4- Upgrade Material Handling and Equipment

  • Invest in ergonomic solutions like adjustable workstations and lifting aids.
  • Implement smart picking technologies such as barcode scanners and voice picking systems to minimise errors and boost fulfilment speed.

 

Strategy 5 – Improve Order Picking Processes

  • Implement batch picking to reduce travel time and boost efficiency.
  • Use strategic slotting for inventory placement, with high-demand items closest to packing zones.
  • Optimise pick paths with WMS software to minimise backtracking and ensure efficient routes.

 

Strategy 6 – Reduce Touch Points and Handling

  • Implement a standardised bin and container system to minimise individual item handling.
  • Prioritise strategic put-away during the receiving process to minimise travel time for frequently accessed products.
  • Leverage automation for material movement, such as conveyor belts or automated guided vehicles (AGVs).

 

Strategy 7 – Optimise Transport and Distribution Strategies

  • Analyse internal traffic flow to minimise travel distances for picking and moving materials.
  • Use route planning software to optimise delivery routes and minimise travel time and fuel consumption.
  • Consider expanding your distribution network with strategically located centres to reduce transportation distances and environmental impact.

 

Reducing warehouse costs is an ongoing process that evolves as your business grows. Regularly evaluate your warehouse operations, embrace continuous improvement, and adapt to evolving technologies to maintain a competitive edge.  

By following this guide and leveraging a comprehensive warehouse management system like SEQOS, you can transform your warehouse into a future-proof powerhouse that will play a role for your future success. 

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