Like that leaky sink faucet, shipping mistakes and inventory control issues don’t really seem like a big deal when you think about each individual drip, but over the span of a month or a year, the costs can be staggering. You don’t believe me? Let’s assume that you’re shipping department is pretty efficient and you only experience a 2% error rate (you are tracking your accuracy rate, aren’t you?). If you ship 50 packages per day and if we assume 250 shipping days per year, that’s 12,500 packages per year. If the average mistake costs you only $100 (overnight shipping, customer satisfaction, etc.), that’s 250 mistakes per year, or $25,000 that could have been going to your bottom line and shipping mistakes are just the tip of the iceberg! There are many opportunities to stop the leaking that is going on in your warehouse.
So where do you start? The first thing you should do is take a walk through your warehouse and look for mistakes and inefficiencies. Don’t just walk through the warehouse, spend a little time out there — learn the processes that are currently being followed and look for ways to improve. If you think your warehouse ONLY has inventory in it, you’re missing the point. The warehouse is a hubbub of activity with people and products moving in all directions. Whether you can see it or not, there are big dollar signs in lock step with all that movement. How much effort is required in your warehouse to locate a product, pack it, and ship it?
What are some of the factors that contribute to all the running around? Well, obviously inventory accuracy, visibility and transparency are key to making the right move the first time. Utilizing electronic tracking technologies is critical to improving accuracy and immediate access to vital data. In addition, these technologies enable you to do the job one time, say at the receiving end, and have those efforts pay dividends in the stocking, picking, packing, shipping, and invoicing processes.
Everyone’s warehouse is unique so I can’t estimate your potential savings from efficiency improvements, but double digit efficiency improvements are certainly attainable. Drip, drip, drip.
Optimize your inventory to cut costs. When inventory accuracy is lacking in a warehouse, the tendency is for the purchasing manager to order more “safety” stock. This, of course, leads to costs leaking all over the place...obsolete inventory, write-offs, lost inventory, warehousing insurance, extra labor and handling, etc. Starting to see the leaks in your systems?
Consider using EDI to get access to the BIG BOYS. Perhaps you have, or want to have, relationships with larger trading partners that require label compliance and the use of EDI. The good news when you get invited to the party is that your business volume will usually increase significantly and if handled correctly, these new relationships could provide access to other big purchasers.
The challenge is that there could be significant charge-backs and penalties if you mess up. The big boys can and will refuse shipments if everything is not exactly as specified. They will expect you to have their requirements dialed in almost immediately, otherwise, you are costing them money and they will penalize you for that one way or another. It is paramount that your inventory and processes be spot on and you can’t show any signs of strain as your volume increases.
Again, having the right technology investments in place can provide confidence that you can supply required documents such as the UCC 128 label, the electronic advance ship notices, and outbound invoices. Absent these and other required EDI components, you will surely incur additional costs and put at risk the relationships you worked so hard to establish. Drip, Drip, Drip.
So how big are the leaks in your warehouse? $25,000, $50,000, $100,000, or more? Start observing, measuring, and thinking about how your warehouse operations can be dramatically improved with the infusion of some fresh thinking and new tools. When every dollar counts, it’s appropriate to pay attention to those leaky faucets in your warehouse — every drip that is eliminated will translate into profit at the bottom line, which is where it belongs!
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