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A number of years back, there was an industry movement to instill lean and Six Sigma practices and principles – powerful efficiency tools in manufacturing – in warehouse operations. Great idea though much work remains to be done to bring many warehousing operations up to the efficiency levels that manufacturers have attained.
Many moving pieces must work in sync, from inbound/outbound to pick/pack/ship. Without efficiency and a culture of continuous improvement, important KPIs like dock-to-stock time, on-time order fulfillment, fulfillment accuracy and cost per order suffer. Worst case, shipments are late, out-of-stocks increase, customers are unhappy and unit profitability drops.
3PLs with a focus on warehousing and value add services have had to implement and improve on lean strategies in order to continually bring value to their clients. The below strategies are a few that 3PLs and great internal warehouse DCs have implemented to improve KPIs while reducing costs.
Focus on Labor Productivity
According to Instawork’s 2023 State of Warehouse Labor report, 64% of respondents said they had to forego business worth more than 25% of their 2022 revenue due to labor shortfalls.
With labor the largest variable cost, this area presents many opportunities for efficiency gains.
Strategies that improve the productivity of the labor force include:
- Having a cloud based warehouse management system (WMS) with standardized operating procedures. Today’s systems provide a dashboard view of inventory management, labor management and tracking the inbound/outbound flow of goods. Further, a good WMS will allow the warehouse to go ‘paperless’ with RF Scanning of barcodes governing all movements in the warehouse.
- Implementing a per piece labor program for value add services, often in conjunction with a third-party logistics (3PL) provider. Hiring temp labor through agencies for large manual projects, while a common tactic, often yields poor results from workers who aren’t invested in your company and have high turnover
- Streamlining and automation also helps reduce labor costs by lowering error rates and rework. For instance, designing an efficient conveyor-based layout minimizes associate steps and travel time. Lean processes to improve workforce efficiency, such as kaizen and kanban, are especially valuable in a tight labor market.
Increasing Inventory Accuracy
Inventory management and visibility are hot topics these days, with good reason. Many companies found themselves way overstocked in 2022, a reaction to pandemic-era supply chain shortages, which they’ve been working furiously to trim since to avoid massive carrying costs. Some tactics include:
- Software tools can help you optimize inventory placement among your various network nodes, using algorithms to determine patterns. This allows you to make more intelligent decisions to bulk up fast-moving SKUs in a particular hot location.
- Robotics and automation have become more widespread in warehouse operations, and improved inventory control is one of the many benefits. Advanced systems include cube-like automated sortation and retrieval (AS/RS), shuttles and mobile robots, either guided or autonomous.
- A standardized cycle count program in which every variance has a reason code and the root cause is investigated with a process fix implemented
Also remember that accurate inventory begins at the receiving process. A barcode based receiving process with checks against the packing slips ensures that inventory is right starting with the first put away.
Shipping On-Time and in Full (OTIF)
Your order fulfillment schedule needs to be managed properly in order to line up with inventory availability, customer demand and promised delivery dates. This includes maintaining adequate inventory on hand based on short- and long-term forecasts, creating staffing schedules and adjusting lines to optimize order flow.
- The fulfillment schedule also needs to sync with carrier pick ups, with orders boxed and palletized on the dock with time allowance for the carriers. Ideally, being ahead of schedule saves on shipping costs, keeping the number of expedited orders low to avoid express charges.
- Having accurate package dimensions and weights helps you avoid onerous DIM weight charges from the carriers. That data, along with case and pallet counts, allows you to select the optimal mode for each shipment (parcel, LTL or TL) and the right carrier and lane.
There are many excellent systems on the market for gathering and analyzing this data, while a top 3PL partner can handle this function for you.
In This Challenging Environment, Shippers Benefit from a Warehouse 3PL Partner
We’re seeing an increasingly volatile market, with supply chain issues, labor shortages and economic uncertainty. Thus, it’s a challenge for shippers to meet ever increasingly difficult SLAs as fulfillment grows complex and costs rise. This is why more companies are looking to warehouse 3PL providers. They’re realizing operational demands will continue to grow and the warehouse is not the core competency of their business.
There are many benefits to partnering with an experienced 3PL warehouse manager. They handle key labor-intensive functions such as kitting and assembly and pick/pack/ship, from their DC or your facility. A 3PL can also handle omnichannel distribution to retail/wholesale as well as ecommerce orders via DTC and marketplaces.
The Challenges Are Real, But Expert Help is Available
One thing is certain: Your warehousing operations will grow more complex and costly over time, not less. It will become increasingly important to implement operational improvements with a strong digital foundation to meet customer demands.
Not sure where to start? Productiv, an industry-leading 3PL warehouse provider, can help you gain efficiency and improve performance using engineered solutions based on lean principles tailored to your needs. Productiv’s industry-tested solutions include warehousing, transportation management, returns/reverse logistics, supply chain data analytics and a wide range of value-added services. Ready to get started? Speak to an expert today.
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