F. Curtis Barry & Company Blog

With the recent growth in online demand, it is putting more constraints on supply chains and distribution space.  This often means that facilities are filling up faster than expected.  This challenge also occurs when companies acquire brands or expand into a new line of business, and the associated inventory is being transferred into the existing warehouse space. 

In most facilities, available storage space is already at a premium even before the new inventory arrives. So, what are some ways facilities can be better utilized in order to avoid taking on additional space?

This question may be the number one question asked as we conduct operational assessments with clients. It is rare that we meet a warehouse manager, or visit a distribution center where they are not trying to fit more product into what seems like nonexistent space - or having to utilize off-site storage. 

Here are seven tips that can help you to maximize your distribution center capacity.

Peak period order volumes often stress fulfillment processes and labor requirements which may cause decreased customer service and drive costs higher.  Process exceptions and errors are magnified by order volume. How well did your fulfillment center perform in the last peak season?  Do you have a plan for improvement to scale to the next peak season’s projected volume?  This article details how to identify the operational changes to evaluate, and possibly change, to make the next peak season more efficient.

In the cost per order, labor generally makes up more than 50% of the total costs (total costs being direct and indirect labor, total facility costs, shipping materials, etc.) excluding inbound and outbound shipping costs. As hourly wage rates continue to increase, overall warehouse productivity in many companies has remained flat.  As a result, the cost per order and units of work produced (i.e., shipped orders, returns, picked lines, and units, etc.) has increased. 

One of the most frequent themes we hear from clients when discussing layout and design projects is that space capacity is a concern in the current facility. If a new facility is not in the future for your company, how can you continue growing sales and inventory, knowing you only have the current space to work with. Let’s make the assumption that your company is already fine-tuning inventory forecasting and removing excess and aged inventory – what are the next steps? 

This article looks at some of the ways changes to the layout and design can help to improve capacity and extend the life expectancy of the current space.

As a basic principle, companies need to ensure that the operations are as efficient as possible, increasing throughput as much as possible while maximizing the capacity and utilization of the space before opting to move to a new facility.  It is critical that the operations have truly taken advantage of the existing facility, due to the high cost of relocating distribution center operations.  

Relocating a facility can, at times, be inevitable, but the disruption of business and impacts on labor mean that you must at first be sure that you have maximized the existing facility. In addition, most major markets are at record levels of warehouse occupancy rates, and lease costs are at all-time highs.  New warehouses being built on speculation are large centers that may not be suitable for small to moderate-sized businesses. 

Vince Lombardi, Green Bay Packers' legendary coach, excelled at winning football games because his teams mastered and executed the fundamentals of blocking, tackling, and passing and leading to the win.  Warehousing and distribution is very much the same, to be successful, we must execute on the fundamentals.  

According to Indeed.com, the job employment website, the average base pay for warehouse workers is $16.78 in the U.S. However, when you factor in benefits such as healthcare, training and more – the fully loaded cost balloons to $28.86 per hour. Companies typically have the following costs over and above the base pay:

• Benefits and healthcare 35% of payroll costs
• Workers comp and unemployment 8% of payroll costs
• Training 4% of payroll costs
• Recruitment, hiring and HR 25% of payroll costs

To say 2020 was a curveball most businesses would be a gross understatement. While Americans suffered and many small businesses closed permanently, multichannel businesses as a whole saw significantly higher volumes, largely from direct-to-customer orders. The difficulty was in trying to keep workers safe and have enough labor to ship customer orders without falling more than a few days behind. For some clients, the goal was to merely not fall more than 10-14 days behind.

An observation that famed British physicist, Lord Kelvin, made about scientific experimentation and operational improvements over 100 years ago is still relevant today in the fulfillment industry. “If you cannot measure it, you cannot improve it.”

As warehouse and distribution consultants, we are constantly seeking to improve e-commerce and retail operations to be more efficient and to improve their profitability and customer service.

In order to improve operations, we first need to measure and track key metrics. Examples of key metrics are the total warehouse cost per order and order turnaround time. Once we understand what these metrics show, we can then develop options for processes that reduce steps and therefore cost; or improve service levels in the warehouse such as the order turnaround time measured in hours.

Warehouse picking errors have a very high cost to your business in both actual costs, and in lower customer satisfaction, Life-Time Value (LTV) and customer retention. These aspects will erode your business’ profitability and customer and Net Promoter Scores (NPS).

A mis-pick or a fulfillment picking error can occur for a variety of reasons:

• A wrong item, in addition to, or instead of the correct item was picked.
• The wrong quantity was picked.
• An item was failed to be picked completely.
• An item that is unacceptable because of damage, incorrect labeling, or packaging was picked.

This article discusses identifying the cost to your business and customer service as well as six ways to minimize picking errors.