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5 Simple Warehouse Cost Cutting Tips for Retailers

May 13th, 2014

Category: ERP Enterprise Resource Planning, Managing Retail Costs, Online Retailing, Retail Business Tips

Small to medium size retailers often overlook the performance of their warehouse. They are focused on the performance of their stores, so as long as there is room in the warehouse for incoming stock and stock gets to the stores on time, retailers tend to turn a blind eye to the internal operation of their warehouse.

With retailers experiencing reduced margins, and warehouse space and staff costs typically in the hundreds of thousands of dollars, many retailers are looking to reduce expenditure in their warehouse operations.

One possibility that many retailers consider is closing their warehouse altogether and have all supplier orders delivered direct to the stores.

However if you are one of the ever increasing number of suppliers that have taken to importing goods in order to improve margins, then you must have a place to receive import shipments. Similarly, if you find you cannot rely on your local suppliers to deliver to your stores in a timely fashion, then you have another very important reason for maintaining a warehouse.

But possibly the most compelling reason to maintain a warehouse is sales from your online store and eBay. As the percentage of sales from these sources increase, you may find it more efficient to fulfill these orders from a central warehouse rather than trying to get store staff to pick and pack online orders from store stock, and to arrange delivery.

Having a need to warehouse stock doesn’t necessarily mean you must have a warehouse. Handing over your warehouse functions to a third party warehouse/logistics (3PL) company is one possibility. However 3PLs typically charge per pick, and as online and eBay orders increase, resulting in many more picks of single items, 3PL costs could sky-rocket.

So you are stuck with having a warehouse. What are some inexpensive ways to reduce ongoing costs associated with it?

1. Label your bays.

While labeling warehouse bays in a logical fashion may seem so obvious to many retailers with a warehouse, my experience is that this fundamental step in setting up and operating a warehouse is often overlooked.

The concept is simple enough. All the racking and shelving is arranged in rows which are numbered – if you have more than 10 but less than 26 rows you might consider a letter for each row, the first being row A. Then a letter or number is assigned to each bay or bin at each height level, e.g. A012, could be row A, bay 01, and the second shelf from the floor.

Once the warehouse bays are properly labeled, put-aways and picking become so much easier, for example store transfer picking slips can be produced in bin/bay location sequence, making picking so much quicker.

2. Turn dead space into cash.

All established warehouses have it – warehouse space that is wasted or “dead” because it contains dead or slow moving stock. Not only is capital tied up in the stock, but the warehouse space it is occupying is also has an ongoing cost.

Obviously you should be trying to turn your difficult to sell stock back into cash and at the same time freeing up valuable warehouse space. But first you need a system to monitor your stock and advise early which stock is slow moving in order to do something about it before slow moving stock becomes dead stock.

EBay is a great way to turn slow or dead stock into cash and free up warehouse space, but you need a system that allows you to list this stock easily, and ensure an eBay listing is removed as soon as an item is sold out.

3. More efficient use of warehouse space.

Demands for warehouse space tend to increase over time. Traditionally this was because of the demands of a growing retailer. But modern retailers are also be affected by the need to maintain stock of an expanding range of items ready to ship in order to satisfy online and eBay sales.

Before you consider moving to a bigger warehouse you should consider more efficient use of your current space. One technique worth considering is converting to smaller bay units. This usually means better space efficiency but the stock for some items will no longer fit in one bay. Your inventory system needs to cater for an item being located in more than one bay.

Another technique to adopt before looking for a bigger warehouse is to go higher. Chances are you current racking does not go all the way to the ceiling of your warehouse, and having higher racking is definitely cheaper than moving to a bigger warehouse.

4. Consider picking multiple orders simultaneously.

Once online and eBay sales get to a certain volume, retailers find that there are a number of orders that need to be picked each morning. Depending on the size and layout of your warehouse, you may find it much more convenient to pick multiple orders simultaneously. This is especially true if some warehouse bays require an order picker fork lift.

In this case the warehouse picker picks all orders for an item while at a particular warehouse bay, and after a single pass through the warehouse, all outstanding orders are picked. This is usually far more efficient than picking one order at a time.

5. Delivery

Most retailers have the delivery of stock to their stores under control, but online and eBay sales means having to organise delivery to virtually anywhere in Australia and possibly overseas as well.

Measuring the dimensions of each carton and then getting quotes from various transport companies for each delivery can be very time consuming, but without getting competitive quotes you risk huge transport bills by choosing the wrong transport option.

A modern retail ERP system like CONTROL Retail ERP solves these problems. A single mouse or keyboard press will instantly get quotes for delivery of a customer order from over 200 transport companies. The best 3 or 4 quotes are displayed to the operator. When the operator selects the quote they want, the transport pickup is booked, and consignment documentation is produced, ready to be printed and attached to the shipment.

The above tips should result in substantially more efficient warehouse operations and reduced warehouse costs. Of course they do require improvements to existing warehouse procedures. CONTROL provides all the functionality you require to improve warehouse efficiency and reduce costs.