With almost no exception, industries are expected to experience a one-month (or longer) significant supply chain disruption every 3.7 years. McKinsey & Company believes the worst disruptions may cause devastating financial losses.
“Knowledge is power” – by educating yourself about the possible warehouse management challenges ahead, it is possible to forecast and brace yourself for the challenges ahead.
Let’s examine the possible inefficiencies in warehouse management – one of the most critical links in the supply chain. What are the problems? Where do they stem from? Is there anything you can do about it?
It is rather common that an item is handled back and forth several times in a warehouse. Once your warehouse grows larger, one order is likely fulfilled by several workers. This may be due to the layout of the warehouse, where the inventories are stocked or the time orders are picked. Whatever the reason may be, the redundant process of passing back and forth the same ticket between different workers creates space for errors. The handling of the products alone is already lengthy, the time you take to go back and re-track the whole workflow will make this process even lengthier. The more a product is touched, the more cost is lost.
Human error does contribute to most of the excessive processes, but the poor control over the number of inventories, overproduction, or underproduction also makes the whole process more difficult. All these aspects create an inefficient warehouse management system.
While the back and forth may be necessary sometimes, this redundancy also prevents you from utilizing your labor and rises the labor cost significantly. The low traceability and connectivity don’t allow your warehouse management system to reach its full potential.
What you can do is use an automated system that allows you and your team to achieve real-time visibility in your warehouse – see what is going on with the items and the orders. The system will also notify you once an item is picked and quickly flag up any duplication, saving a lot of time and labor costs.
Poor warehouse layout
Soaring demand in warehouses has pushed the prices up substantially, so it is important that warehouse managers efficiently utilize warehouse spaces.
Studies have shown that warehouse spaces aren’t optimized as well as they should be. The lack of storage space causes accidents, damages the items, and hinders the product picking process. As a result, your profit suffers badly. The inefficiency of your warehouse management suffers, too.
Here are a few suggestions for you to tackle this issue.
Start by quantifying your storage capacity and utilization. Then, analyze your storage space, study your building, supply storage, and even the door usage of your warehouse. Take the aisle width into consideration – your workers need space to move around and stay safe. If you plan to use equipment, make sure there is enough space for them, too. There is one more thing, and many warehouse managers tend to look over this – examine your vertical space carefully and make sure you’ve made good use of it. Take advantage of the clear space.
If you ever find yourself pondering over several solutions, go for the simpler one and slowly optimize from there. For instance, start by placing the fastest-selling products and the short-shelf life products in the most accessible area of the warehouse. This simple arrangement allows your worker to pick up the order much faster. Remember, time does have a direct impact on your profit – the more items picked, the more orders are fulfilled.
On the other hand, technology has developed rapidly in recent years. If you and your team are ready to upgrade the system, then you can always automate the process and use warehouse management systems. Warehouse management systems simplify and streamline the process significantly. However, it is okay if you think warehouse management systems are not yet for you. Start from the basics first.
This seems like a lot of work, but it is all worth it in the end. Going through the layout carefully and carefully categorizing improves accessibility dramatically and makes sure the quality of the inventory isn’t compromised.
Poor inventory management
When it comes to warehouse management, efficiency and precision are tightly associated. Therefore, any inaccuracy in inventory management may have a strong impact on the execution of the entire supply chain. Namely are the following common occurrences: a worker comes to pick a specific item but can’t find it, as it turns out it has been stored elsewhere. You reject an order because you believe there is not enough stock, while in fact, you have just missed a good business deal. Or the complete opposite may happen, too: you take an order but the item is currently understocked, so you scramble to fulfill the order.
As a result, shipment is delayed, you have to pay late charges, and your business’ reputation is negatively affected. The unwanted build-up of dead inventory is another case you might have experienced due to inaccurate inventory tracking. The list goes on and on, but above are some of the most common cases.
As previously stated, manually maintaining inventory records is error-prone. Additionally, you might experience difficulty in updating the ever-changing stocks. Another reason for the inefficiencies is outdated software. Again, these are the aspects that create inefficient warehouse management.
What you can do in the ever-changing complex supply chain world is opt for a warehouse management solution. The software provides you with order management systems and inventory management systems using barcode technologies. Specifically, these systems update and give you real-time information about location and stock level. This saves you and your workers a lot of time, allowing orders to be fulfilled faster and more accurately.
Remember, whether it is excess or lack of stock, in the end, it all comes down to the warehouse charges and the number of sales.
Not prepared for seasonal peaks
If you are unable to handle the fluctuation of demands, the result is, once again, inefficient warehouse management.
Not being aware of the customer’s shifting demands can result in a serious loss of sales. Your team may struggle to fulfill the orders if the demand goes up unexpectedly. Moreover, storage charges may go up if there is obsolete inventory that cannot be sold simply because the demand during that specific season is lower. Hence, accurate forecasting plays a crucial role in drawing up a good stock plan.
What can you do to face the challenge of demand influx?
- Invest in good data gathering and analytics software. Proper data management is the first step to more precise forecasts, so you can better understand your warehouse for seasonal demands.
- Keep in touch with your business partners – suppliers, retailers, and transporters. Not only will you have a list of partners to contact if any unexpected orders come up, but you also stay updated about the demand information and adjust if needed.
- Rearrange your warehouse so that the fast-selling products are in the most accessible area of the warehouse. This saves the putaway and picking process a lot of time.
- Dealing with seasonal demands isn’t only about forecasting and rearranging the warehouse, it’s also about managing your transportation network. Should you manage all these factors well, you will significantly strengthen the health of your warehouse system and achieve increased supply chain visibility.
High labor costs
Warehouse managers tend to overlook labor costs. In fact, labor costs often make up more than half of the warehouse expenses. Inefficient warehouse management may stem from inefficient labor cost management.
Labor is needed for many tasks in the warehouse, ranging from putting away orders, operating the forklift, picking, packing, cleaning, shipping, and monitoring. To reduce costs, a large number of managers may focus solely on reducing labor by automating the system. What they don’t notice is the fact that they may have not yet maximized their available labor capacities. It is suggested that you utilize the combination of both – go over the capabilities of your labor while automating the system.
Once you reviewed your employee’s performance and spot the weak links – it may be the lack of training, integration, or the fact that they haven’t achieved the required KPI – you can decide what the next action is. In order to save costs, make sure you have fully utilized the system’s potential and that there is just enough staff to perform the tasks. Only then should you consider hiring more people or having automated tools pitch in to reduce manual work.
If you decide it is time for automation, a warehouse management system might be what you are looking for. Not only does it greatly simplifies the tracing and tracking of the inventories, but it also helps you manage your labor, including
- Planning (how many staffs are needed at a specific season or for an order)
- Performance (tracks the KPI)
- Task assignment (automatically assigns task)
- Safety control.
Poor quality control
Quality control seems trivial when there are hundreds of orders to handle each day. This is especially true when workers are overworked and the system is outdated.
Nonetheless, regular quality control allows you to prevent further damage that becomes much more troublesome in the future like pests or water damage. With that being said, you can always manually lessen the damage by making sure the aisles are wide enough and well-lit. Use protective gear such as anti-slip tape, rack safety products, and so on.
You can always use the help of a warehouse management system to spend more time focusing on monitoring the quality, too.
Warehouse management system is one of the most important processes in any supply chain system. Any mistake or inefficiency in warehouse management may have a ripple effect on the entire system – it goes without saying these inefficiencies are expensive.
While it is difficult to completely avoid every single mistake or inefficiency, you have given yourself the advantage of preparation by educating yourself. Knowledge is power. Remember, warehouse management is complex and error-prone, so you need to regularly go through its processes and make regular adjustments. Using a warehouse management system is a great way to start streamlining the processes so you can focus more on the strategic objectives and improve the quality of the overall warehouse management.