Minding the Space: Effective Warehouse Cost Reduction Strategies

Minding the Space

Increasing productivity from your layout and storage space can help you reduce warehouse costs. Here are some effective warehouse cost reduction strategies:

Maximize Space Productivity

In many cases, a full warehouse might just imply inadequate shelving. Make sure you use the full height of your warehouse by choosing the right type of racking. Adding a mezzanine or platform shelving is one way to gain vertical space in the warehouse. Aisle space can also be reduced depending on the equipment used. Investing in redesigning your warehouse can repay for itself in a short period of time.

Effective slotting requires that the location for each product should be determined by its size and the product velocity. Fast-selling products, and larger products that may require the use of forklifts, should be kept nearer to packing and freight terminals so as to reduce travel time. Considering the right picking method based on the type of product and the type of orders also reduces travel time. Some of the methods are batch picking, zone picking, pick and pass, pick to cart, etc.

Reducing handling costs

Reduce the number of times a worker is required to handle products. The fewer the touches to a product, the less the cost of shipping an order. Material handling doesn’t create value and every minute saved in picking, moving, sorting or stocking material is a minute that can be put to use elsewhere.

Streamlining operations by using proper slotting practices can reduce handling and significantly bring down the cost of fulfilling an order.

Unloading goods from an incoming truck and loading them directly into outbound trucks, or cross docking, is an effective practice to reduce handling and shipping costs while improving customer service.

Minimize slow-moving Inventory

Examine your product mix to make sure you’re buying in the correct numbers of each item based on its turnover. Warehouse management systems can help determine optimal inventory sizes at any given time and notify you about potential shortfalls or excesses. By keeping inventory levels closely pegged to demand, you can increase the throughput of your warehouse.


Labor costs are usually the largest expense in the warehouse, and can account for the majority of a warehouse’s total operating costs. Increasing labor efficiency can help speed up picking, packing and overall order processing/turnaround time. Here are some ways to reduce your labor costs:

Training workers

3PLs can expend a significant amount of time and money on recruiting and hiring employees, only to find that turnover rates remain high. Retaining workers in the long term requires some effort in the initial training period. Creating training manuals can save time and make the training period more effective, while also enabling new employees to learn about their specific job, the company and its work culture. Clearly documenting the various functions an employee must perform and specifying the expected output for a given job can help employees better understand what is expected of them.

Effective workforce management

Setting and providing targets to workers is important. Creating quantitative measures can aid in setting individual goals for employees and improve their productivity and accountability. By collecting the actual performance of workers and comparing it to the goals set, you can get a better picture of the various processes taking place. This data can be used to identify areas of high performance and those with comparable inefficiencies. You may even display the data in periodic graphs to show actual versus plan metrics such as total error rate, cost per transaction, reported savings, etc. These provide workers with real-time input as well as motivation.

Doing all this manually can be cumbersome and prone to error. Integrating labor management into a warehouse management system can reduce costs, time and human error related to planning workforce schedules and tracking their actual progress.

Feedback, incentives and reducing attrition

Apart from higher efficiency, setting up goals also allows you to recognize the most productive and trustworthy employees and implement a reward system. As already mentioned before, posting results can provide meaningful feedback to employees and motivate them to meet or exceed expectations. By highlighting individual record holders in various functions, management can create a friendly competition on the warehouse floor. Reward employees by moving them up the ladder. Place people in positions where they have a good chance to succeed. People will work harder, and be more likely to stay on, when they see there is possibility for career growth.

It isn’t only your employees that gain from feedback. By establishing a clear and transparent exit interview process you can gain insights into why people leave. This can help you take steps to reduce turnover.

Predictive Analytics

3PLs: Leveraging Predictive Analytics

The journey of a product from an online shopping cart to a doorstep is complex and requires multiple stages of careful planning and painstaking attention to detail. It can be daunting to manually keep track of inventories, shipping, tracking, delivery and other aspects of the logistics process.

The wealth of data generated by devices such as GPS trackers, scanners and sensors can be leveraged to gain a clearer picture of logistical hurdles and to streamline operations. By analyzing this data 3PLs can automate repetitive tasks, run simulations to test out alternatives and find the most effective ways of doing things. Data can also guide decisions and cut through the growing complexity of supply chains by providing timely and regular updates at every stage of the process – whether is in the warehouse, in transit or during the last mile.

Predictive analytics and data-driven techniques can provide a better understanding of the demand for goods and make inventory management much more efficient. The analysis of data from warehouses and fulfilment centers can help identify seasonality or changes in demand patterns. Predictive algorithms can help determine optimal inventory sizes at any given time and give 3PLs the agility to respond to market conditions quickly.

Businesses that partner with 3PLs can also acquire greater clarity into their own operations. By using the knowledge generated by analytics, decisions regarding investments in manufacturing capacity or expenditure on inputs can be optimized to keep inventory levels closely pegged to demand. This, for example, can prevent potential shortages or reduce expenses businesses may have to incur on excess warehousing.

The growth in e-commerce and omni-channel distribution has put pressure on 3PLs to cut delivery times while also keeping costs at a minimum. As customers have come to expect quicker delivery times, greater flexibility and prompt service, even minor disruptions can have significant consequences. 3PLs must prepare for all eventualities in order to remain competitive; here predictive analytics can help work out the kinks within the process.

Predictive Analytics

Analyses of large amounts of data on different modes of transportation, their costs, distances and travel times can help 3PLs find out how effective each mode of transportation or a combination of them is meeting delivery times. Devices can monitor temperatures to ensure that goods are being stored and shipped under the right conditions, can assess road and traffic conditions to calculate possible delays and observe weather patterns. Predictive algorithms can use all of this data to run various scenarios and sort through millions of options to determine the best route to delivery locations.

Real-time tracking makes the entire supply chain process more transparent. More accurate tracking as well as regular collection of data regarding location and physical conditions can be used to provide customers with more precise information about goods mid-trip.  A clearer picture of last-mile delivery can also prevent and rectify issues such as delays, damage, loss of goods and other logistics issues that may come about at drop-off locations. Greater transparency and keeping open direct channels of correspondence with customers during delays can also improve customer experience and increase retention.

The collection and analysis of data also allows businesses to be more responsive to the requests of their customers or any complaints they may have. Even after the delivery is completed, customers can provide useful information to 3PLs. Defective goods can be identified by analyzing customer behavior following a delivery and an increase in returns or help requests with regard to a certain product, could be a signal to stop shipments of other similar products thereby averting additional issues.

Keeping the customer satisfied is crucial to any business, especially in a hyper-networked world where feedback and online reviews of a few customers can quickly make or break the image of a company.

While costs of data centers and other resources may deter 3PLs from investing in analytics there are clear advantages to it. It can find cheaper and faster transportation, increase the efficiency of inventory management and improve clarity and transparency, not just for the 3PL, but also for its partners and consumers. Additionally, the longer a system runs and the more data it gathers, the more precise its predictions and more useful its prescriptions become. Thus, the benefits of using predictive analytics within the 3PL space are numerous.