6 November 2021 The goal of every logistics manager is to seek maximum efficiency at the lowest possible cost. It is their duty to develop strategies and maintain good management so that the operation can achieve maximum productivity without excessively burdening the sector. After all, what’s the point of having good performance if you spend too much on labor, equipment maintenance, and storage? Ultimately, the company’s profitability will suffer. That’s why combining efficiency and cost reduction is the great secret to making the business profitable and continuously growing. It is important to remember that efficiency also means customer retention. If your warehouse’s performance decreases or quality is reduced, the customer retention rate will reflect it. Inefficient operations can lead to long waits, which is one of the main reasons a customer leaves a company and migrates to a competitor. Moreover, inefficiency leads to wasted work. If a worker makes unnecessary movements, going back and forth to the same place multiple times, precious time is lost that could be used to separate more orders per day, for example. The same goes for the use of equipment. Therefore, the big change is to ensure the best use of every resource in the Distribution Center (DC). And this can be done with the help of specific technologies for intralogistics. Even if you don’t have the budget to fully automate your warehouse, there are several steps you can take to improve efficiency and reduce operational costs. This is what we will show below. Check out the tips: 1 – Optimize storage space We are experiencing a boom in online sales. To cope with this strong demand, many companies have increased their purchases from suppliers and sought to expand their inventory. As the company acquires more SKUs, the inventory ends up increasing. However, expanding the storage area or having a new DC can be expensive. Therefore, before making any investment of this nature, it is better to optimize the existing storage space. If you are going through a similar situation, the first step to reducing costs is to look for vertical inventory. It is also important to manage the occupation of each address well, and for this, having a WMS system makes a difference. The software handles all storage management, indicating, as soon as the product arrives, its best position, according to its rotation and characteristics. Additionally, the WMS constantly works to keep the warehouse occupancy rate as adequate as possible, aiming to optimize the storage area. The software’s logic (algorithms) allows for instant evaluation of stock, free and occupied positions, and product characteristics. With this, the WMS can manage storage, always aiming at stock defragmentation. Another advantage of the WMS is that the software balances the line, determining product positions at various picking station addresses and keeping them supplied at the optimal level. The system determines the best positions for A-curve products, making the separation process more agile, which, besides meaning greater productivity, helps reduce costs, as we will see in the next topic. Also, regarding product positioning, it is necessary to remember that having a good addressing layout is also part of space optimization. The layout should favor picking, meaning it should be structured to facilitate product exit and access at the time of picking. And if you have software like WMS, you can manage this layout more simply and efficiently. 2 – Use the ideal picking mode for your business Did you know that picking is responsible for about 60% of the costs of an intralogistics operation? That’s why when it comes to reducing costs, it’s necessary to prioritize the separation process. You need to evaluate bottlenecks and check if your operation uses the ideal picking mode for the company. There are several picking models (discrete, batch, zone, wave, large volume, two-step, with confirmation, goods-to-person, cross-docking, for example), each of which is more suitable for a particular type of product and order. Also note the warehouse layout, the number and diversity of SKUs, sales seasonality, etc. Therefore, defining the ideal model requires a thorough study of your business and its operation. After defining the ideal model, it’s important to define strategies to optimize the process and reduce costs. In this case, you can rely on WMS. As explained in the previous topic, as the warehouse receives the products, the system indicates where these items should be placed. Both the goods and their addresses are registered, thus facilitating quick location at the time of picking. Furthermore, a good WMS will optimize the path taken by the cards. Based on product variables and incoming orders, the system will provide employees with an optimal path, significantly reducing order preparation times and movements. All this translates into lower costs, as more orders are sorted per hour and day. 3 – Review stock replenishment practices As the intralogistics activity grows, it is normal for the company to hire a full-time inventory controller. This professional is responsible for monitoring inventory levels and managing replenishment orders. With manual replenishment, errors end up being inevitable, causing inefficiency that can cost you in two ways: overstocking/out-of-stock. The first generates additional storage costs, and the second leads to customer loss. To prevent this from happening, it is essential to have good replenishment practices, as the WMS can help automate part or all of the process. With the system, you can configure the minimum and maximum stock. Therefore, when products run out, the WMS automatically generates a replenishment activity, making stock rotation function according to picking (Kanban). By also setting the maximum level, you reduce the possibility of having products lying around in the storage area and abusing space. 4 – Automate repetitive tasks A DC with fully manual processes has a great loss of time with repetitive tasks, in addition to higher costs with errors and rework. These issues could be eliminated by investing in an automated or semi-automated operation. When the product arrives at the warehouse and must be checked “by eye” and with a sheet in hand, it takes much longer, and the chances of human error are high. This is also the case with picking done with a printed list. With a WMS system and an RF collector, the conference and separation become agile and assertive, and any discrepancy is automatically notified by the software, allowing for quick correction. WMS also brings agility to picking by relying on solutions that allow, for example, order grouping. This prevents excessive movements and access to the same place multiple times in a row. With the system, your company saves not only on paper use, becoming more sustainable, but especially on increased productivity per person. 5 – Standardize and control your workflows Employee productivity is often lost because there is no standardized workflow. Some may add an unnecessary step in task fulfillment, cover more distances, or even get confused during work execution. Without a well-defined flow, they end up choosing the most comfortable way. But it doesn’t always work, after all, what is comfortable for the employee may not be the most efficient and profitable way for the company. That’s why it’s very important to standardize and control workflows. When processes are automated, you ensure that all employees operate according to the same standards. Additionally, it is possible to monitor each employee’s performance against benchmarks established for the area in which they operate. And again: the employee themselves has the opportunity to monitor their performance, self-managing their work. This ends up impacting productivity (read about Management at View). Before automating processes, don’t forget that your employees need to be heard and trained. Workflows rely on people not only to complete the task but also to improve them and make your warehouse more efficient. Therefore, it is important that they are well-guided and that you are open to feedback, in order to promote continuous improvement. 6 – Conduct cyclical inventories In addition to costs related to labor, equipment, and storage space, managers must also deal with losses. And the best way to reduce them is to introduce a cyclical inventory policy in the warehouse. Therefore, any discrepancies found can be addressed quickly, avoiding significant losses, quite common when performing only one count per year. Therefore, it is important to perform periodic inventory counts, with A-curve products subjected to verification more frequently. WMS can help a lot in this task. After making the settings, the software automatically generates counting orders, whether geographic, by product, by sampling, among other specifications. If a divergence occurs, the system generates a notification, and thus, the manager can investigate possible causes and make necessary changes. As a result, losses are reduced, and inventory accuracy can reach up to 99%. With cycle counting, you also have the opportunity to better monitor your inventory, identifying, for example, inactive products that consume a large part of the company’s active capital. When performing this inventory monitoring, it is important to consider the average number of days needed to sell a product and the product turnover rate. With this data and financial reports, you will be able to analyze the average profit each merchandise brings to your company. 7 – Manage returns well Another important action to reduce costs is to manage returns well. Often returned goods do not receive proper treatment and end up getting lost in the warehouse, which can be misplaced or subsequently discarded. Therefore, it is necessary to have good reverse logistics management. The ideal process is to treat the return the same way as a product received from the supplier, meaning the returned item must be checked, verifying all its data (batch, expiration date, for example), assessing if it is indeed the product that was sold by the company and its state of preservation. Subsequently, if it is in perfect condition, it should be sent to the storage area. If not, it should be directed to a segregated area. Relying on the WMS system makes managing all the steps involved in this return process much easier, allowing not only for the exchange to be agile (benefiting the customer) but also for the returned product to be correctly sorted, classified, and, when in perfect condition, quickly returned to stock. The important thing in reverse logistics is to develop a process that is capable of avoiding unnecessary losses, which generate costs for the company, and at the same time, ensure that the exchange is quick and assertive, in order to offer a good customer experience. Invest to save The phrase in the title of this section may seem nonsensical, but the truth is that companies that invest in the right tools to ensure efficiency and better use of their resources end up turning what could be seen as “expense” into the right solution to save money. It is useless to cut costs by making decisions that end up reducing productive capacity, limiting future growth. To increase business profitability, it is necessary not only to reduce costs but also to increase revenue. Therefore, investing in technologies that allow you to fulfill more orders per day, have greater internal productivity, and achieve customer satisfaction leads to even better results. Before implementing a WMS system, for example, it is important that you are aware of all the bottlenecks in your operation, and an audit can be helpful. You will then be able to communicate better with suppliers, choosing the one that offers solutions suitable for your business and a flexible system that will accompany your growth. After deployment, use KPIs to constantly evaluate performance and make necessary improvements. Over time, every change made will continue to reduce costs and bring even more innovation to warehouse operations. Reduce warehouse costs and increase the productivity of your logistics. Deagor WMS per ecommerce può aiutarti!