Learn How You Can Tune up your warehouse?
The coming few years are again going to have a significant role in the shaping up of the logistics industry. With the help of globalization and liberalization, the global economy is far more connected. Directly or indirectly, this has led to the expansion of 3 PLs, the Distribution Centers as well as the improvement in the working of the warehouses. However, this in no way means a reduction in the competition. A lot of your competitors have already begun working for this new world. This can be well proved with the recent transformations taking place in the industry. Few examples of these changing trends have been compiled by us here.
Increment in Distributed Order Management and Omni Channel
- Enabling processes and technology to optimize the fulfillment on the basis of expectation of customers’ with an object of minimizing the costs.
- Linking the technology across different supply chain nodes
Greater Collaboration, Visibility and Flexibility
- Increase in the use of ASNs, flow through processes as well as cross docks so as to improve inventory turns.
- Collaborations of Distribution centers, competitors, suppliers and stores so as to include embedded distribution centers with VAS, suppliers, co packing, etc.
- Flexibility in TMS/WMS architecture
- Full order or shipment life cycle tracking
Widespread use of Predictive Analysis
- Utilization of the real time and historical data so as to ensure better labor planning and inventory positioning.
- Supply chain segmentation with regards to competitive advantage Vs. Cost Center involving massive use of predictive analysis.
On the whole, the opportunities created in 2016 and beyond are certain to ensure a more rigid competition backed with significant change. Taking all this into consideration, now you have to analyze what exactly can a warehouse do so as to ensure that it is pepped up enough to seize the upcoming opportunities. Let’s take a look at 5 tips to Tune up your warehouse
5 Points to Ponder
Analyze the Profitability by Account
The base of tune up is to improve the warehouse in all those areas that matter the most. So, what is more important than the profit margins of your warehouse? Hence, the first tune up is to have a detailed understanding of all those activities that help in making your business earn substantial profits on every day basis. Of course, here you also need to consider the areas that account for the maximum cost. To be able to understand this in the best manner possible, you must understand the complexity as well as the size of every individual customer. For this, let’s just break up the total customer revenue into 4 key sales categories that are used by Third Party Warehouses.
- Prepaid Freight
True, some warehouses track the revenues in even more detail however, these four categories and in particular two i.e. handling and storage, account for the maximum revenue. These two are hence most crucial for the success of a warehouse. So, after you have segregated the revenue earned from these 4 categories, you need to access the cost that you need to incur for earning the revenue. On comparison, you’ll be able to calculate the profitability of the account.
You cannot deny that the performance of your employees has a massive impact on just about every aspect of the business operation. Thus, an effective tune up should involve a thorough evaluation of every member in the payroll. This evaluation should involve both hard cost assessment as well as soft cost assessment.
Hard Cost Assessment
When it comes to hard cost assessment, you first need to evaluate the average labor rate for the operation of the warehouse. This needs to be compared with the Average Billing Rate. So, when the Average Billing Rate is more than the Average Labor Rate of the warehouse, the difference that you get is your profit margin.
Soft Cost Assessment
Soft Cost Assessment includes the following areas:
- Quality of Training
- Commitment of the staff
- Effectiveness of Scheduling
After you have gathered your data, you must compare them so as to reach on to your profitability findings. This will help you understand, where you are and where you ought to be.
Self Analyze your Processes
The third tune up tip is to conduct a detailed analysis of every process involved so as to see if it can be improved further or not. For this you must ask yourself some questions. These are:
- Is this process necessary?
- Is it redundant?
- Can it be eliminated via automation or technology?
- Is the process inefficient or poorly designed?
Beyond this, in your analysis you must consider whether there are any other variables that could be hampering the efficiency of your processes. This would involve everything right from the location of the key components across the warehouse to the configuration of the internal space of the warehouse.
A close and detailed analysis of all the processes would reveal different opportunities that can help in improvement of these processes thereby accounting for overall profitability.
Checks on Physical Assets
It is true that the financial aspects of the physical assets are largely fixed. The matter of the fact is these costs are significant and must be examined closely. So, whenever you want to make an investment in any new asset or location, you know it is going to be one expensive affair however not investing in the same may prove to be a lot more expensive in the long run. So, before you analyze whether an investment is needed or not you must analyze where you are today and where you ought to be in the future. For this you need to consider:
- Warehouse Location and Space
Size and the location of the warehouse is definitely an important aspect of your business. These can also be costly to upgrade as the expense of relocating can be massive and leases are usually long term. The larger picture is that moving to a new location can definitely be fruitful in the long run. So measure the choices before finalizing on anything.
- Warehouse Equipment and Automation
Possessing state of the art equipment is definitely one quintessential way to improve the efficiency of the warehouse. But making an investment in every new equipment and technology will definitely be pricey. So, you need to analyze when is it the right time to make an investment. To answer this, you must return to tune up tip 3 i.e. Self Analyze your Processes.
Upgrade your technology
Technology is definitely one of the most powerful, fastest and cost effective means to upgrade the overall performance. So, an absolute assessment of the technology that you use is the final and the most important tune up tip for your warehouse.
For this, you must first fully understand the requirement of your system. This would involve understanding what are the tasks that you want your systems to perform and what are the tasks they are already performing. You have to analyze this from a financial perspective too. In case the system is falling short, it may be a little costly for you.
A lot of warehouses fail to utilize the technology to its full capabilities so, first you must contact the system provider to understand the completely capabilities of your systems. If you are using the system to its full capabilities, you must upgrade to the latest version of your existing version and if in case you are not using it to its full capabilities, you must begin using the same to its full potential.
Above are the 5 most important tune up tips for your warehouse. These exercises are definitely going to prove viable in the long run so do implement them in your warehouse, right away!