Does your warehouse have a positive impact on your efficiency and profitability? Or is it a drag on your bottom line?
If your answer is “I’m not sure,” you’re not alone. Many manufacturers and industrial companies who warehouse parts and products don’t have the data and transparency they need to accurately evaluate their warehousing processes. The result is an inefficient warehouse, which can hurt your cash flow and your margins.
Gather Data ➜ Implement Strategies ➜ Improve Performance
How can you gauge the efficiency of your warehouse? The first step is to identify key metrics that measure your warehouse’s operations and effectiveness. The next step is to set standards and expectations for those metric. And then you gather data and implement strategies to improve performance.
Not sure what metrics you should measure? Below are a few questions about your warehouse functions. If you can’t answer these questions, or if you aren’t happy with your answers, it may be time to consider new strategies or processes.
How frequently do you conduct cycle counts?
Regular, consistent cycle counts are a critical element in any warehouse management plan. A cycle count is an inventory of a small section of your warehouse. By counting a sample of your warehouse, you can get some idea as to whether your inventory records are accurate.
It’s important to know not only how often cycle counts are conducted, but also in what order they are conducted. Cycle counts only work if they cover a broad swath of your warehouse. If you’re counting the same small sample over and over again, the cycle count won’t give you much information about your records’ accuracy.
Schedule regular cycle counts and conduct them in a consistent pattern through your warehouse. That will help you gain insight into your records. If you don’t know when your last cycle count was conducted, now might be the time to implement a new count schedule.
What is your inventory turnover rate?
Struggle with cash flow challenges? Look at your warehouse inventory turnover rate for the possible solution. Your turnover rate is the frequency by which you completely cycle through your inventory. The higher your turnover rate, the more product you’re shipping out the door. That should mean more incoming cash flow.
Of course, if you don’t know your current turnover rate, it’s hard to implement potential improvements. Cycle counts, annual inventory counts, and tracking systems help you gain more transparency into your inventory so you can better track this important metric.
How many of your warehouse employees are cross-trained to perform a variety of functions?
One of the biggest drags on warehouse efficiency is excessive labor costs. Warehouse tasks can vary from day-to-day. Some days you need to put new inventory on the shelves. Other days you need to pull inventory for production or shipment. Other times the focus is on counts and inventory management.
If you have warehouse team members who can only perform one function, you may be operating inefficiently. For example, consider a team member who can operate a forklift and load and unload inventory, but isn’t trained on the technology used in cycle counts. That worker could have little to do during times when counting is the priority.
View More: How to Cut Labor Costs [PDF] ✂️
Are all of your warehouse team members trained across multiple functions? Can they shift nimbly to those tasks that are you highest priority? If you don’t know the answer to those questions, it might be time for a formal employee training program.
You may be better served by a third-party partner who can handle your warehousing function for you. For instance, consider a partner who could potentially manager your warehousing, packaging, and even your distribution. That kind of partnership could give you a powerful, cohesive strategy that optimizes your warehouse and boosts your efficiency and productivity.