F. Curtis Barry & Company Blog

Most distribution center operations have seen significant increases in warehouse labor costs, as well as all time high lease costs for a new facility. These factors have driven more companies to consider warehouse automation to remain in the current facility longer and reduce the labor costs. These two cost components can radically increase your cost per order. However, this does not mean that companies should simply employ automation without achieving a cost-effective warehouse automation ROI.

One of the first aspects in determining the warehouse automation ROI is to ensure that the automated solutions being considered are realistic for your business. Many companies begin their process with some “YouTube shopping”, becoming enamored with a certain automation system. That skips over any detail consideration of current process, systems and costs.

As part of our distribution consulting services, we have performed hundreds of operational assessments and identified several ways companies can save money through improved order processing and inventory storage.  We have compiled the following quick-hitting list to be included in your warehouse assessment that will assist in reducing your supply chain operating expenses and improving customer satisfaction.

As warehouse consultants, we work with a wide range of businesses, the discussions often surround topics such as, "How do we know if we are as efficient as we could be?  What do we need to change to support the business’ growth and order fulfillment needs?”  The short answer is typically companies need to perform a warehouse or distribution center operations assessment.  

So, what is an operations assessment?  It is a methodical and comprehensive approach to analyzing all facets of the operations – from organizational staffing, team members and people utilization; processes, and warehouse management systems; to the layout of the facility; and how material handling equipment and automation are deployed. The objectives are to identify all the ways in which the warehouse operations and the physical assets can/should be improved to meet both the customer’s and management’s expectations and requirements.   These recommendations should then be prioritized based on resources; capital expenditures required as well as benefits to build a roadmap for implementing the recommendations. 

With labor expenses increasing, small parcel shipping becoming more expensive and carriers struggling to support the volumes, companies are implementing new strategies with Micro Fulfillment Centers (MFC).

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

An efficient warehouse maximizes its space use, streamlines operational functions, and increases employee productivity. A Warehouse Management System (WMS) standardizes and manages the four-wall activities and inventory management. When a warehouse is efficient, customers receive their orders on time, and the company's costs are in-line with management’s financial plan.

Below are nine major ways a WMS improves operations efficiency.

Entrusting your customer service and fulfillment to a 3PL company is a big step. Like using other outside services, it’s important to manage the process and to reduce errors and exceptions in order to provide high-level service at an affordable cost.

Productivity and quality are usually measured in pieces per hours, cartons shipped, etc. When executed well, the following 8 steps will make your 3PL partnership that much more cost effective and stronger as a strategic function.

If you’ve been around long enough, you recognize that there hasn’t been enough experienced management in retail, catalog and now e-commerce operations for decades. With the Internet growth over the last 15 years, management turnover and the lack of highly qualified managers is apparent and may be holding your company back.

In operating multiple DCs, one of the major on-going costs is the additional inventory at the SKU level that will be required. Many times, companies are surprised at the magnitude of the inventory increases. Our experience is that a second DC adds 30% more overall inventory in a company, then just having a single DC. A third center may add 50% more overall inventory, then a single DC. Obviously, the increase doesn’t automatically correlate to the company being able to achieve 30% and 50% higher sales without some major marketing and promotional changes.

This title of this blog might sound naïve considering S&H’s high cost to direct-to-customer businesses and the time companies spend on discussing it. Let me give you two examples to show you maybe there is additional homework companies need to do before changing policies.