In the increasingly complex flow of goods that exist today with for example e-commerce and omni-channel with generally shorter lead times, you risk the cost of warehouse logistics to skyrocket unless companies start working cross-functional in the supply chain.
The warehouse is the hub of the supply chain, it is the warehouse that faces the biggest challenges of the modern logistics seen from a cost perspective. The number of order types and delivery methods have become more complex, often should a warehouse today handle large orders regarding business to business and at the same time manage business to consumer orders. This requires a great deal of flexibility while making it more difficult to plan the work because of consumer orders which are ordered, packed and shipped the same day without any advance planning.
As you see above, there is a huge cost-saving potential in warehouse logistics, the company that attacks the challenges in the right way has a huge competitive advantage and margin enhancer.
E-commerce orders with fewer lines and lower value affects the warehouse negative in an efficiency perspective. This puts high demands on systems such as ERP, WMS and TMS. In consolidating picking rounds and batch picking to bring down the walking / driving time and increased value for every task in the warehouse.
But another important factor is goods receiving and put away, if the supply chain is working cross-functional with the warehouse it is possible to make great synergies in saved labor costs to get the goods in stock, but also a reduced lead time from the goods arrive at the warehouse until the goods is in available balance. Supply chain need to set high requirements on suppliers regarding how the goods are packed and labeled. These requirements must be based on feedback from the warehouse. Warehouse should build up their structure in cooperation with the supply chain based on how the goods are packed when they arrive at the warehouse. All in order to optimize the transports in the warehouse in connection with receiving and put away and thus minimize the value decreasing activities.
Supply chain must also calculate what the optimal order quantities per item is, they should consider the costs of each warehouse task that must be done in conjunction with receiving and put away. Moreover, don´t forget inventory carrying charge. I often encounter colleagues within warehouse operations who talk about the suppliers ‘promotional offers’ that purchasing departments often accept. Large quantities ordered home, handled, and then lie on stock for months and sometimes years. If you calculate the inventory carrying charge, it often does not pay to accept and buy these ‘promotional offers’.
To keep costs down, there must be a “minimalistic” mindset throughout the supply chain from cradle to grave. Every transport and operation must be valued and included in the calculatedly costs when purchase department order.
One of the most important critical success factors for logistics companies is to have a competent IT department. IT department must ensure that systems are developed and updated with the latest features as soon as possible for the supply chain and warehouse to be optimized continuously. Purchasing system, WMS and TMS must support traditional flows but also business to consumer flow. It is important not to be stuck in a certain way of working because of rigid systems, the IT department have to be responsive and work cross-functionally with the warehouse and supply chain to quickly optimize and adapt the systems for cost reduction in logistics flows.
It is extremely important that there is expertise in the company for preparatory calculations when it is time to invest in IT systems like purchasing system, WMS and TMS. The systems are complex with many advanced features, if you fail to calculate the benefits of an optimal system utilization it is difficult to get acceptance on investment. Board of directors must be convinced with economically credible figures.
Warehouse operations is getting more and more complex with omni-channel and so on, if you want to be competitive you need to have advanced systems to support you and make full advantage of all the including features. Time is everything, it is all about save time in every operation in your warehouse. Get rid of the old warehouse philosophy that a warehouse most important task is to just store products in a proper way. Today, warehouse is a production unit with all that implies.