Retail

How to Maximize Warehouse Efficiency

Written by: Parcel Pending

9 Min Read

Published: April 10, 2019

Updated: March 29, 2023

Warehouses are the backbone of any retail business. Not to be confused with a fulfillment center (read our article on what is a fulfillment center to learn more), a warehouse is a large storage space where goods are stored before being distributed for sale. Warehouses must be carefully managed, reviewed and improved upon to ensure your inventory goes out quickly and accurately, seeing as customer satisfaction relies on it. With so many moving parts, it’s easy to overlook when your warehouse operations are running sub-optimally. While this may seem like a minor oversight, neglecting warehouse efficiency can hinder business growth and cost considerable amounts in the long run.

All improvements to warehouse operations should focus on at least one of these aspects:

Reducing costs—costs include money, time, and errors.
Enhancing quality—this can apply to many things like accurate product deliveries, customer satisfaction, or laborers’ morale.
Setting groundwork for future improvements

Read on for more information about specific actions you can take to maximize warehouse efficiency and your overall order fulfillment process.

Track Warehouse Productivity

Tracking warehouse productivity sounds like a no-brainer but it’s not always obvious what this entails. After all, warehouses are bustling with activity so it can be difficult to parse out what measures you should focus on to maximize warehouse efficiency. Steps to help you navigate this process include:

1. Establishing a baseline
2. Identifying goals
3. Testing changes

Establish a Baseline

Measuring your current performance is imperative to pinpoint areas where you can improve.

What are your transportation and storage costs? How much time and money is spent on certain tasks? How many errors take place at the warehouse and how much do these mishaps cost you? These questions will help you prioritize effective changes to your warehouse operations, and these are questions you likely deal with daily.

Identify Goals

Your goals should be related to your business’s critical success factors (CSF) and key performance indicators (KPI). Is your warehouse productivity contributing to the achievement of your target KPIs? If the answer is no, then you need to create tangible goals aimed at changing that.

An example of a CSF is customer satisfaction and the KPI would be percent customer satisfaction. A huge determinant of customer satisfaction is timeliness and accuracy of delivery, which is determined by the productivity and efficiency of your warehouse and distribution system. Therefore, effective goals could be reducing order lead time by 50% and increasing perfect order rate.

Test Changes

Keeping tabs on critical metrics will help you assess which modifications are the most effective at reducing costs and improving operation quality. A few months after implementing a change, assess whether you are closer to hitting your target KPIs. If you aren’t, then it’s back to the brainstorming board. However, if you are hitting target KPIs then you are on the right track to optimization. Conditions will not always be the same so it’s important to periodically review your warehouse performance and make new changes when necessary.

The idea of tracking productivity will come in handy when testing out the rest of the tips in this article. You could trust that these ideas will increase efficiency or you could see for yourself the exact advantages your warehouse gains from implementing them.

Distribute to Parcel Lockers

With today’s booming e-commerce, shipping orders to customers’ doors has become a huge cost and generates more work for warehouse employees. Retailers can reduce fulfillment costs, move products quicker, and manage inventory better by utilizing intelligent electronic lockers. It’s a convenient system not only for warehouse teams but also for customers; they can retrieve delivered packages at their leisure using a unique code sent via text, email, or mobile app. Here is a summary of the benefits:

Fast— Rather than sorting out packages that need to be sent to thousands of addresses, this final-mile delivery solution allows for one stop shipment drops.
Reliable—Risk of failed delivery is greatly reduced since the lockers securely store packages until customers are ready to pick them up.
Informative—With parcel lockers’ smart technology, inventory audit reports are more readily accessible as well as metrics on multiple key performance indicators. This will help you track warehouse productivity and ROI.
Scalable—Reports providing insight to parcel locker station’s occupancy, turnover, pickup times, and parcel sizes will help you determine demand for additional parcel locker stations.
Straightforward—Both pickup and returns are hassle-free for customers which improves satisfaction and builds loyalty. For returns, customers simply place the return label on their package, scan the label at the parcel locker station, and deposit their package into the locker that opens. This gives retailers the ability to process refunds quicker, track their inventory more closely, and put returned products back into circulation sooner.

Upgrade Warehouse Amenities

There are many upgrades that take warehouse performance to the next level. Some require an upfront investment but ultimately will improve productivity and cut down on costs over time. Here are just a few upgrades that are easy to implement and highly effective:

Install Voice-Enabling Technology
Go green
Maximize storage space

Voice-Enabling Technology

Voice-enabling technology, also known as a pick to voice warehouse system, allows pickers to be more accurate and efficient. Like Siri for your warehouse, this system utilizes speech recognition and synthesis to communicate with operators. Instructions are delivered via a headset and the operator can confirm product selections by reading back the last 2 or 3 digits of the item to the system. Studies have shown that switching from a paper-based system to a voice-directed picking system can improve picking accuracy by 80 to 90 percent.

Operators using this system don’t need to hold onto paperwork or handheld barcode scanners which frees up both hands for picking. Additionally, their eyes don’t have to toggle between paper and their surroundings, making the space safer. These systems are quick to install, easily integrated into your existing WMS, and intuitive to use. You could see ROI in as little as four months.

Go Green

Being environmentally conscious is not just about branding your business as a socially responsible company. Taking steps to make your warehouse more eco-friendly will not only help save the planet but also save your business lots of money. It’s a win-win situation, so strive to implement these green practices in your warehouse wherever possible.

Reduce

Reducing energy and resource consumption is a great place to start when looking for ways to lower warehouse spending. You can lower your energy bill by switching old light bulbs to energy-efficient fluorescent ones, harnessing free solar power, installing motion sensors to illuminate areas only when needed, and charging equipment during weekends or off-peak hours when electricity rates are lower.

Reducing wasteful material is another huge cost-saver. This could mean switching over from a paper-based system to an electronic one or decreasing the amount of packaging used in shipping products.

Reuse

Most warehouses are already accustomed to reuse as their sturdy equipment, like wood pallets and plastic totes which are built to last. However, recently the idea of reusable product packaging has become popular. Packaging can be a costly resource that doesn’t necessarily have to be tossed after one use. After it fulfills its duty of protecting a customer’s product, it can be returned for multiple runs down the distribution process.

If your business utilizes parcel lockers, then the packaging is likely to last even longer as it won’t be sitting on someone’s porch exposed to the weather. Locker stations can also facilitate the package return process.

Recycle

Many waste products of a warehouse are recyclable. The most obvious being cardboard and plastic containers, but batteries, oil, and chemicals also have specific disposal methods to keep them out of landfills. By contributing materials to recycling plants, you also make it easier to attain packaging made from recycled products. Recycling rather than destroying reduces costs as well as produces an environmentally sound business.

Maximize Storage Space

A common problem warehouses face is not taking full advantage of their space. Warehouse space is finite so make sure it is being used wisely by:

Expanding into vertical space; increasing your warehouse footprint requires more land and more money whereas expanding into vertical space is basically free. All it takes is sturdy tall shelving to store more products in the same square footage. Investing in quality industrial shelving will ensure that your products can be easily and safely accessed.
Using standard bins or specially designed racks to organize smaller items rather than leaving them on pallet racks and running the risk misplacing them.
Reserve large spaces for bulky or fast-moving items so that they can be effortlessly transported.
Adopt lean inventory so that floor space isn’t wasted on redundant items. This is achieved by reducing safety stocks and having suppliers deliver small batches at higher frequencies.

Optimize Flow

Time is money which is why improving warehouse flow is important. The key to optimizing flow is finding ways to simplify processes. Fewer touches mean less work for warehouse staff and quicker task completion. This translates to reduced costs and higher productivity.

The designated location for each item in your warehouse influences both the put-away and pick-and-packing process. Make sure the layout of inventory contributes to improving efficiency by analyzing material usage patterns. Items with high demand should be located at the front of the warehouse to reduce travel time. Items frequently sold together should be located near one another for straightforward retrieval. This information can either be obtained from the warehouse management system or by manual evaluation.

Organize Workstations

Unorganized workstations cause headaches and foul moods, hurting productivity. Work smarter not harder by organizing workstations with the “5S” method in mind: sort, set in order, shine, standardize, and sustain.

Sort out unnecessary tools. This keeps the work floor clear of obstacles and distraction that may hinder productivity.
Set equipment in order by their function and by where they are used. Arranging workstations in a logical order will help tasks run smoothly.
Keep your workplace shining by tidying and inspecting machinery for wear and tear. This will prevent accidents and breakdowns from occurring.
Standardize a procedure a schedule to maintain the previous three steps
Sustain the 5S method by training workers on the organizing process

Energize Your Team

Even with the rise of machine automation, your warehouse would be nothing without the dedicated team that keeps everything running. Warehouse performance can be greatly enhanced by communicating specific goals and providing regular feedback on employee and departmental performance.

Additional ways to boost team dynamics and increase warehouse productivity include:

Encouraging effective frontline managers
Providing incentive pay
Coordinating with vendors

Encourage Effective Frontline Managers

The best managers are leaders that meticulously monitor, plan and manage all aspects of fulfillment. They are continuously developing their skills so that they can swiftly recognize and address new problems. Warehouses with managers that have access to training resources and exposure to other angles of the business will be most effective in improving warehouse efficiency.

Incentive Pay

Incentive pay programs, where employees are rewarded for hitting their goals, can drive up productivity. A bonus of incentives is elevated job satisfaction, strengthened employee morale, and enhanced worker retention, says Justin Cooke, co-founder at Royal CBD. In conjunction with incentive pay programs, displaying warehouse productivity in real-time is a powerful motivational tool because it directs self-monitored improvements.

Coordinate with Vendors

Vendors play an important role in your team too. Work with vendors to develop policies that guarantee on-time delivery, define quality and item specifications, and spells out your standards. Shifting inventory control up the supply chain will reduce the effort required to correct mistakes at the warehouse, and optimize operations.

In Summary

Maximizing warehouse efficiency does not mean the expensive restructuring of your system. Lowering costs of operations and improving the quality of your output can be achieved simply by tracking growth, staying organized, and developing a diligent workforce. However, you will likely see greater leaps in productivity by modernizing your operations. This could include distributing to parcel lockers, switching to voice-enabled technology, updating storage equipment, or engaging in eco-friendly practices.

However, the path to maximizing warehouse efficiency doesn’t end here. You should be consistently researching new technologies to adopt. Establish objectives that will keep you and your team accountable, assess progress, then repeat the process, setting out for even greater heights.

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