Warehouse Optimization: Maximizing Space Utilization and Reducing Costs

In the world of supply chain management, warehouses play a crucial role in storing and distributing goods efficiently. However, many companies struggle with limited space and rising operational costs, which can hinder productivity and profitability. The key to overcoming these challenges lies in warehouse optimization. By maximizing space utilization and reducing costs, businesses can unlock significant benefits and gain a competitive edge in the market. In this post, we will explore practical strategies and actionable tips to optimize your warehouse operations and get the most out of your warehouse or distribution center.

Conduct a Comprehensive Warehouse Layout Analysis: A crucial step in warehouse optimization is analyzing the current layout to identify inefficiencies and areas for improvement. Consider factors such as storage density, product flow, accessibility, and safety. By critically evaluating your warehouse's layout, you can identify opportunities to reorganize storage areas, implement better aisle configurations, and utilize vertical space effectively.

Embrace Technology and Automation: Incorporating technology and automation solutions can revolutionize your warehouse operations. Implementing the right Warehouse Management System (WMS) can streamline inventory control, order fulfillment, improve overall accuracy, and enable further improvements. Additionally, technologies like barcode scanning, RFID tagging, and automated systems can enhance picking and packing processes, reducing human errors, and saving valuable time.

Prioritize Inventory Management and Sales and Operations Planning (S&OP): It is very important to look at supply chain planning from a holistic, end to end, point of view. This will help the overall business on a strategic level and positively impact the warehouse operation by having better inventory management. Successful S&OP and inventory management is crucial for space optimization and cost reduction. By understanding your inventory levels, turnover rates, and demand patterns strategies can be implemented that minimize excess stock, reduce carrying costs, and maximize available space. Furthermore, adopting an ABC analysis methodology can help prioritize items based on their value and optimize storage allocation accordingly.

Implement Lean Principles: Applying Lean principles to warehouse operations can lead to significant improvements in space utilization and cost reduction. Techniques such as 5S (Sort, Set in Order, Shine, Standardize, Sustain) can improve the efficiency at workstations by eliminating waste and creating an organized and efficient workspace. Lean methodologies also promote employee involvement, creating a culture of continuous improvement.

Optimize Slotting and Picking Strategies: Effective slotting and picking strategies can minimize travel time, reduce labor costs, and enhance overall warehouse productivity. Analyze your SKU velocity and order patterns to strategically place fast-moving items closer to shipping areas, reducing the time taken to pick and pack high-demand products. Regularly review and adjust your slotting strategies to align with changing demand and business requirements.

Foster Collaboration with Suppliers: Collaborating closely with suppliers can help optimize warehouse operations and reduce costs. Explore vendor-managed inventory (VMI) programs which allow suppliers to monitor and replenish stock levels directly. This reduces lead times, minimizes stockouts, and frees up your warehouse space. Additionally, explore opportunities to change that way that vendors ship product to help expedite the receiving and put away processes. Potential changes include packaging, labels, and cross-docking practices to reduce handling.

Warehouse optimization is a critical aspect of supply chain management that can yield significant benefits for businesses. By maximizing space utilization, implementing efficient processes, and leveraging technology, companies can reduce costs, improve productivity, and enhance customer satisfaction. Remember, optimizing your warehouse is an ongoing process that requires continuous monitoring, analysis, and adaptation to evolving market dynamics. By adopting the strategies discussed in this blog post, you can take a proactive approach towards warehouse optimization, unlocking its full potential and positioning your business for success in the competitive market landscape.

Considerations When Designing a Warehouse

Whether you are opening a new warehouse or distribution center, adding a product line, exploring automation, or just running out of space, there are many different considerations when optimizing a warehouse layout and associated processes. We wanted to share some insight regarding the Establish methodology for warehouse design projects, specifically the inputs we like to gather before any concepts are drawn or recommendations made.

First Steps – High Level Planning

The beginning of a warehouse design project should include a few conversations – those that define the scope of the project, success metrics, key stakeholders, and any headaches or concerns that should be solved by the new layout. It is important to lay everything out on the table, because the ‘optimal’ layout is not always the best suited to the operation and employees involved. Before beginning the project, it is paramount to understand company values, value propositions, goals, sales channels, customers, seasonality, and forecast. Additionally, involving all affected employees or group representatives and establishing rapport keeps everyone’s interests aligned.

Process & Material Flows

Following a high-level understanding of the business, the warehouse processes are of highest priority in determining warehouse layout. There is no better way to learn about process than physically being on the warehouse floor, walking through each decision point step-by-step. Shadowing, documenting, and talking with operators will be your greatest resources – no one knows the process better than those working it day-in and day-out. The time with operators develops buy-in for the future layout, ensuring that everyone’s needs and challenges are considered. While shadowing, it is important to remember to follow the entire lifecycle of a product through the warehouse, from the time it enters the premises through delivery into the customer’s hands. We’ve found that having a thorough understanding for the operation leads to better data analysis later in the project.

Data Analysis on Volumes

In addition to the qualitative observation of process, warehouse design should include a healthy amount of quantitative data analysis to determine product volumes and order profile as these are what dictate labor and spatial requirements. Order profile is the single most important piece of data for warehouse design, it is the driver for process and storage. Understanding how product is ordered, be it pallets/cases/eaches, will define what picking strategies you can deploy (think pick by order, batch, cluster, wave, or zone picking). Having a grasp on peak volumes, not just averages, assures the operation can withstand those high-volume days. Order profile, picking strategy, and volumes help determine inventory space necessary and labor hours involved.

Bringing it Together

The combination of process knowledge and data analysis as inputs for the design will allow for a better chance to land on a solution that is both optimal and meets the needs of the business. Once we’ve developed planning factors and worked through this qualitative and quantitative approach to the inputs, we can begin to iterate through concepts. Think of the observations and analysis we’ve done before as puzzle pieces – each piece (i.e. the amount of racking for a product, staging space, or machinery) is a defined amount of space. From here, we fit all those pieces together, draw material flows to follow the life cycle of the product, and visualize. After that, it’s all iteration.

Warehouse Automation: Where to Start?

In the days of the pandemic (and even pre-pandemic), the trends and challenges facing the warehouse industry are clear: difficulty finding labor. As such, exploring automation for warehouses has never made more sense. However, it is a daunting task to understand and explore how to start. Below, we explore basic options to explore warehouse automation.

Automated Repeated Material Movements

Automating activities that only people can do is difficult to achieve currently; however, there are repetitive movements such as walking or transporting material that can be automated, typically at a good ROI.

For carts, something like CartConnect works well. Also, conveyance is always a good option. For repeatable pallet load movements, AGV forklifts are good at moving loads from one end of an operation to another.

Automated Storage and Retrieval

The second option is arguably the most automated – automated storage and retrieval (ASRS). There are many systems under this umbrella, but the concept remains the same for all: the ASRS will take product the operation has received, automatically store them, then pick/deliver them to an operator as needed.

Systems range from a mini-load system to a full pallet ASRS to the new solutions on the market for smaller product like the AutoStore. Also included are dense/fast-pick solutions such as vertical lift modules (VLMs) and horizontal and vertical carousels.

Whichever system is selected, the benefits are the same: more efficient storage space and reduced warehouse labor in putaway and picking, 2 of the most time-consuming processes in distribution operations.

Transaction Automation

Though perhaps not the first thing to come to one’s mind when thinking of warehouse automation, transaction automation is arguably the most important. This is a very broad term but stands for eliminating manual operator interactions to log transactions. The default way for an operator to log inventory movements, receipts, etc. is to manually type it in to the ERP or WMS. The ways to automate this are varied, from RF guns/scanning to RFID to voice picking to put-to-light/push buttons. Regardless of the method, automating transactions improves

5 Supply Chain Trends for 2021

This past year has created many new challenges for everyone, causing consumers and companies to adapt. We expect some of the supply chain changes to be temporary but that many of them will have a lasting impact on the supply chain industry going forward. Below, we discuss some of the trends that we expect to see in 2021.

Fulfillment and Logistics as a Competitive Tool

Every year we continue to see consumer behavior change, and in no year has that change happened as rapidly as in 2020. People want to get quality goods for a reasonable price and quickly. Unorganized supply chains will become increasingly exposed as companies will have to choose between bad service levels or unsustainable costs to meet customer demand. The most obvious example of this trend is Amazon's move to achieve next-day or same-day shipping. As stated above, consumer expectations for service continue to rise. This means businesses that have systems in place to forecast well, stock optimal levels of inventory and fulfill efficiently have a significant advantage over those that do not.

Focusing on E-Commerce, Service Levels and Omnichannel Development

The shift from brick and mortar retail to e-commerce has been growing every year, and COVID-19 only expedited that growth even more. It's no surprise that consumer’s extreme shift to e-commerce seen in 2020 will have a lasting effect on the way people do business moving forward. In addition to the e-commerce shift, service levels are also becoming a higher focus as consumers are going to choose the quickest and most reliable option. To keep up with these shifts, companies are going to have to continue to focus on developing their omnichannel strategy. This means using support systems to create an interconnected network of stores, warehouses and 3PLs, providing the flexibility to fulfill both large wholesale purchases and small e-commerce orders. Companies can then leverage this interconnectivity within the network to optimize fulfillment strategy on an order level basis.

Shifting E-Commerce to a 3PL

Another industry trend we expect to see is a significant shift for e-commerce distribution towards third-party logistics companies (3PLs). The e-commerce industry, in comparison to brick and mortar stores, presents a complexity that is hard to tackle for smaller companies. 3PLs provide an option that will allow companies to set up much quicker than if they opened their own warehouse and allow them to avoid significant fixed costs, have access to an already established network and get specialized processes based on their needs.

Making Procurement a Focus

COVID-19 complications and global trade friction with China mixed with consumer’s increasing expectations for better service have signaled to the supply chain world that now may be the time to focus on procurement. By moving suppliers closer to home (near-shoring) and prioritizing the procurement process to make lead time and flexibility priorities, companies can improve their fulfillment times and overall supply chain. Developing a regional supply chain offers the better potential for mutually beneficial relationships and improves both time and proximity to market. This confidence in relationship management and product could challenge the prior approach of low-cost country sourcing.

Freight Normalization – A New Baselinne

COVID-19 has caused overwhelming increases to volume causing capacities to be tested and costs and rejection rates to skyrocket. As the freight companies profit on these higher rates, it can be expected that they will reinvest into capital expenditures, such as more trucks, increasing capacity to meet market demand and normalizing from the economic shifts of 2020.

 We wish everyone a safe and healthy 2021.

How to Modernize Your Warehouse/Distribution Center: Part 2

In Part 2 of our process to modernize warehouses, we discuss the systems and automated confirmations necessary to eliminate human error and increase efficiency.

Support Systems

Support systems are critical in transitioning a warehouse into the modern age of logistics. Some of the most common types of support systems include Enterprise Resource Planning (ERP) systems, Order Management Systems (OMS), Warehouse Management Systems (WMS) and Inventory Management Systems (IMS). Whether your distribution network consists of hundreds of warehouses around the globe or a single warehouse that ships to just a few customers, there is a support system that can help. There are numerous different options out there and each one has different capabilities, strengths, and weaknesses. Finding the right support system for your business is critical for any operation. These systems generally support warehouse operations by collecting and tracking data, standardizing processes and allowing operations to be executed more efficiently. The system should support all the current operations by decreasing manual work and helping implement future improvements. Without a WMS or other support system, warehouse processes and operations will be very manual and slow. Additionally, without a support system you will be limited in the further improvements and technology that can be added to the warehouse. Implementing a support system is a significant investment and might be difficult to see the exact ROI but it is one of the most important investments that can be made in a warehouse. It will support the entire operation by:

• Allowing processes to run quicker, meaning less time is spent on standard operations and higher throughput is achieved.

• Tracking and giving access to data which can be analyzed to see where further improvements can be made to reduce costs and increase output.

• Making it easier to track and manage inventory and KPIs which will result in better performance, lower costs, and higher output.

Automated Confirmation

Automated confirmation is the piece that brings together everything that we have talked about so far. We use the term ‘automated confirmations’ to be a blanket statement for all methods of an operator verifying their warehouse activity systematically, such as RF scanning, RFID, voice picking, etc. Using automated confirmation technology can drastically reduce the opportunity for human error and the time it takes to perform operations. An operator just needs to scan/speak/move a product and/or location rather than writing information down or updating the system manually. This will also provide increased visibility. Since the system is being updated at the time of the transaction, there will be a more accurate and real-time look at data which can help with knowing where products are and how much time is spent on different operations.

Adding these improvements will modernize your warehouse and allow it to operate more effectively and efficiently compared to how it operates today. They will also set you up to continuously grow and improve by making it easier to implement new improvements and technologies down the road.

How to Modernize your Warehouse/Distribution Operation, Part 1

For companies to stay successful over a long period of time, they must constantly be improving and changing with the times. This is especially true in warehousing and distribution. One of our core competencies at Establish is helping our clients logically and cost-effectively modernize and improve their warehouses and distribution centers. Over the next few weeks, we will be walking you through many of the steps necessary to modernize warehouses, from the most basic operation to a fully automated solution and everywhere in between. We start with two of the most important: Inventory Locations and Product Labeling.

Inventory Locations

Throughout a warehouse, there are many different places that inventory is stored. Simply adding names to each of those locations can help pave the way to a modernized warehouse so that an item and quantity can be tied to for efficiency and accuracy.

The naming structure can be virtually anything and should be relatively easy to follow. Each individual location should have a unique name and be labeled, with the labels being be easy to read and including barcodes to allow for scanning capabilities or check numbers. At a minimum, inventory location labels should have the location name and barcode, but they can also include more information such as color coding and the product(s) stored there. Below is a sample location name for a warehouse with standard pallet racking aisles:

The benefits of adding inventory locations to your warehouse include:

• Better tracking and traceability of inventory.

• Improved inventory accuracy and easier cycle counting.

• The ability to implement more robust warehouse practices such as barcoding.

• Improvement to current picking and put away processes.

• More functionality out of the current support systems.

Product Labeling

In addition to labeling the inventory locations, all the products in the warehouse should be properly labeled. These labels should include the product name, associated barcode, lot/batch/expiration date (if applicable) and be clear and easy to read. Products should be labeled directly upon receipt, prior to being put into storage. Even better, it can also be coordinated with suppliers to include these labels on the products that they come in already labeled. Labeling allows products to be identified seamlessly during receiving, picking and inventory counts and will help reduce human error and manual processing.

Next time, we talk about the IT and Support Systems as well as Automated Confirmations (RF scanning, voice, RFID, etc.).

An Often-Overlooked Aspect of any Operation that can be Improved

As supply chain consultants, we are fortunate to be exposed to nearly every industry and have the unique opportunity to see hundreds of different warehousing and distribution operations. We get to see the different operations for exactly one reason: our clients want us to help improve them.

The most common item we recommend improving is the cleanliness and orderliness of a warehouse. Maintaining a clean and orderly operation is much more important than just the optics (though the optics are important - imagine taking a potential client or business partner through a dark warehouse with trash on the floor and graffiti on the wall!).

A clean and orderly operation drives the culture of accountability and effort. When nothing is disorganized or out of place, it makes it that much harder for someone to purposely misplace something or work inefficiently. When cleanliness is stressed, it follows to all aspects of the operation, from receiving to stretch-wrapping the pallet going out.

As simple as it sounds, this idea is not so simple to implement. Operators are typically evaluated on their productivity. The more you pick/put away accurately, the more productive you are. However, this leads to the little things being forgotten. Will an operator want to put an empty carton away in the corrugate bin if it slows them down? Probably not. These need to be taken into account when evaluating your warehouse personnel. Productivity is key, but not when it neglects other areas of the operation.