From paying staff and purchasing equipment to energy bills and admin costs, warehouses incur many expenses. It can be tricky to understand how to reduce storage costs in your warehouse. With the right guidance, however, you can increase profits, decrease unnecessary financial losses, and improve operational efficiency.
What Are Warehouse Costs?
As with any business, running a warehouse will always incur costs. The types of costs vary between warehouses, depending on your industry, facilities, and capabilities. Below are some of the main elements that contribute to the costs of your warehouse:
Handling of Goods (both receipt and dispatch)
Improving your warehouse’s operations helps keep costs down, and keep staff and customers happy. With the right strategy, you can increase efficiency and productivity to help you lower costs. However, implementing cost-cutting measures can be daunting; how do you reduce warehouse costs and where do you start? Keep reading these top tips to understand the best way to reduce expenses, while improving your warehouse’s operations.
Optimising Storage Space
Instead of paying for more storage space, you can save money by optimising your existing space. Land cost is one of the biggest expenses warehouse owners have to account for. Whether you’re renting or own your property, the larger your warehouse is the more it will cost. However, having a warehouse with a larger space may not be cost-effective. A more profitable solution may be to optimise your storage space through pallet racking, shelving, and intelligent warehouse design.
As part of your warehouse, you should incorporate aisles that make navigation easier for staff, whether they’re on foot or operating machinery. Not only do they optimise storage space, but they also allow staff to locate goods faster and more efficiently. Pallet racking is the best way to optimise your existing space. Racking utilises vertical space and increases the square footage available to use for pallets.
Depending on how high the storage system climbs in your warehouse, you may need to use a forklift to load pallets onto the racking. You can also automate the stacking and picking process using machinery. There is a wide range of pallet racking systems available, ranging from double-deep racking that allows you to store pallets two-deep on a single self to mobile racking that you can move using a remote control to reduce how many aisles you need.
Reduce Labour-Related Costs
Operational efficiency isn’t only about optimising storage space, you need to optimise your staff’s processes too. This reduces labour costs as staff productivity increases, so your employees are spending more time on profitable actions. You may have a dedicated team, however, when work processes aren’t efficient, this will increase the time it takes to complete tasks.
For example, assigning staff a specific area to pick items from reduces time spent walking between different sections of the warehouse, which also improves operational efficiency. During working hours there should also be as little dwell time as possible. Having a set process that shows staff tasks they can complete while waiting for a delivery to arrive is a productive solution.
Automating certain processes can also reduce long-term labour costs. For tasks where you need your staff, however, focus on retaining your best and most experienced employees; it costs less to continue paying the salary of an existing team member than to hire and train a new person. Investing in staff training that focuses on productivity will help you improve your operational efficiency and can increase long-term profits.
Image credit to Creative Safety Supply
Use Cross Docking
Cross docking means unloading inventory from a manufacturer and delivering it directly to the customer. This process removes the need for a middleman and reduces how long items need to be stored for or removes the storage stage completely. Using cross docking reduces costs as you optimise your operations and your storage space.
When a delivery arrives at your warehouse, without a cross docking terminal the stock may need to be stored. This takes up valuable space unnecessarily, space you could be using to store items that can’t be transferred directly to customers.
Having a cross docking terminal ensures outbound stock heads off to its destination without taking up any more time or space than needed. With the right cross docking process, you can reduce labour costs, improve product management, and optimise storage space.
Reducing Energy-Associated Costs
Do you know how much money you spend on energy costs for your warehouse? On average in 2020, large business unit rates were at nearly 13p per kWh for electricity and nearly 2p per kWh for gas. Following these metrics means the average energy bill for a large business could come to almost 12,000. This shows the money-saving potential that an energy-efficient warehouse has.
As a warehouse owner, there are a few simple ways to reduce energy-associated costs. Heat losses not only mean your employees are cold and stock could be damaged, but all heating you’re paying for is lost. Improving your warehouse’s insulation helps your property retain warmth, which also reduces your energy bill as you don’t have to spend as much on heating.
Lighting is another area that causes energy costs to rise for warehouses. Automatic lighting is a great way to reduce artificial light usage. Whenever a member of staff exits an area, they don’t even have to think about switching off the lights, they turn off automatically after a period where they don’t sense motion. Adding windows increases natural light, which not only improves workplace wellbeing but also reduces how often you need to use artificial lighting.
Consider The Equipment You Use
Warehouse equipment purchases can take out a large chunk of your budget. When optimising your operational processes, consider whether you need to invest in an upfront purchase for equipment. If you don’t use the equipment regularly in your warehouse, it’s more cost-effective to hire the machinery as and when you need it. For any equipment you use every day, if possible, you should make sure it has multiple uses to give you maximum value for money.
You should also look after your equipment. If you don’t regularly maintain machinery, it could stop working, or worse, break while in use causing a safety hazard. When equipment experiences wear and tear, this shortens its lifespan, so you may need to replace it sooner. With regular maintenance, you can increase the equipment’s durability and extend its life removing the need to pay for expensive replacements.
Discover smart warehouse design solutions that have a direct impact on your business, get in touch with SEC Warehouses today.
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