Some of the biggest kinks in a company’s supply chain are unexpected delays, and many of these holdups occur in the warehouse. An organized warehouse helps to ensure smooth operations, reduce errors, minimize costs and maximize productivity. By keeping up with the latest strategies on how to organize a warehouse, arrange stock and manage inventory effectively, you can better ensure that your warehouse operates at peak efficiency.
The rise of ecommerce has stretched many companies’ supply chains to their breaking point. As shipping and inventory demands continue to increase, warehouse managers must optimize their workspaces to operate as efficiently as possible.
Warehouse organization ideas
Obviously, no one wants a messy, chaotic warehouse, and many operators and managers believe they have an ideally optimized warehouse. However, there are always innovative factory storage ideas with the potential to improve warehouse efficiency further.
A warehouse layout design that efficiently uses the entire floor plan can help improve operating costs and boost your bottom line. Every inefficiency, such as clogged aisles and misused storage space, means tasks take longer than they should, which wastes money and time.
Review your current floor plan to look for inefficacies to ensure your warehouse is optimized for your specific needs.
- How orderly is the warehouse? Are there clear delineations between the receiving, storage, picking, packing and shipping areas or do they bleed into and overlap one another? (One way to determine this is to pretend you are a visitor to the building. Could you quickly and easily identify each area by sight?)
- Are the travel distances from storage to shipping as short as possible, especially for the most popular inventory items?
- Are there opportunities to improve the existing storage space, perhaps with new shelving or narrower aisles (without compromising the safety or productivity of the workforce)?
- Is there a system for storing similar products, such as by size, weight, popularity or demand?
- Are all products labeled to be accurately and quickly identified using barcodes or RFID tags?
Technologies like a robust, real-time inventory management system that utilizes barcode scanners can help keep track of stock levels, monitor product movement and streamline the replenishment processes. Also, by employing warehouse management software to automate data entry, you can dramatically lower manual errors and improve inventory tracking.
How to arrange stock in warehouse
There are several different theories about how to arrange a warehouse. Every warehouse manager must decide which is best for their industry and inventory.
ABC Analysis
The ABC analysis for organizing inventory leans heavily on the Pareto Principle (also known as the 80/20 rule), which states that most consequences come from only 20% of the causes. For example, many salespeople generate 80% of their sales from 20% of their clients.
An ABC analysis sets the value of inventory items based on their importance to a business or industry and ranks them into classes, either A, B or C. As you can likely guess, only about 20% of the inventory gets the coveted class A slot, which is the most important inventory. Class B is a slightly larger group since these are valuable, just not as valuable as class A. Class C is the largest group (about 50% of the inventory), which is the least valuable inventory.
An ABC analysis helps warehouse managers ensure they always have enough class A stock to satisfy demand. Also, should demand decrease for a class A item, managers can easily spot the change and reclassify it if needed.
First-In, First-Out
First-in, first-out is a method of storing inventory that’s as straightforward as it sounds: the oldest product on the shelf is the first that’s sold to a customer.
There are many reasons to utilize a first-in, first-out organization system. The most obvious is perishable inventory. If something like milk sits around too long, it will become unsellable either because it is about to spoil or has gone bad. The next reason is a little less obvious: accounting.
Even in the best times, prices fluctuate, and that is especially true during high inflationary periods where costs are expected to rise. The cost of inventory sold is an expense that accountants deduct from a business’ total revenue. Using the first-in, first-out method, the cost of inventory is calculated in the same order the business purchased it.
For example, a business purchased 300 gizmos for $20 and 200 more for $30. However, it was only able to sell 150 of those gizmos. To calculate the business’s total cost of the gizmos sold, an accountant would only use the $20 amount. However, if the business sold 400 gizmos, an accountant would calculate 300 of them at $20 and 100 at $30.
Zone picking
Zone picking, sometimes called pick and pass, divides a warehouse into distinct sections with order pickers assigned to specific areas, reducing employee travel time and congestion while improving productivity.
Workers only grab products from their assigned zones. Often, this means that different order pickers must work together to fill an order. However, when implemented in large warehouses with various products, zone picking can significantly improve efficiency.
Shipping department organization
The shipping department is the nexus of most warehouses. Although it is the last step in the flow of a warehouse (or perhaps, because it is the last step), delays in the shipping department often ripple backward, causing delays and bottlenecks throughout the building. Efficient shipping department organization is crucial to ensure timely and accurate order fulfillment and an essential aspect of warehouse organization.
Streamlined order processing
One of the most successful strategies to avoid shipping bottlenecks is ensuring everyone is on the same page. That means creating a standardized process for receiving, picking, packing and shipping orders. The process should be the same for every package that arrives through your receiving doors (or at least the same for similar types of packages).
One significant benefit of establishing a standardized process is fostering collaborative communication between warehouse departments. It is essential for receiving to communicate with picking so they can easily reach out to packing and shipping. Regularly sharing information on inventory levels, shipment schedules and potential delays will help eliminate any mysteries and, hopefully, most unwelcome surprises.
To achieve this result, once again, technology can help save the day. Barcode scanners help ensure that every piece of inventory is tracked and easily located, while an inventory management system provides the ability to view inventory levels immediately, flag unavailable merchandise and reorder items when running low.
Carrier selection and optimization
For businesses that have standardized the shipping process and have departments communicating like they’re old friends from grade school but continue to face shipping delays, well, the problem may be them instead of you.
How long has your company worked with your current carrier (or carriers)? It’s possible that your business needs have outgrown their capabilities. It may be time to explore other options to discover if you can get better service from another company (perhaps at a better price, too). Reach out to several carrier companies and evaluate them on reliability, cost-effectiveness and delivery speed. You can also optimize your shipping operations by negotiating contracts with preferred carriers and establishing mutually beneficial partnerships.
Product returns
When establishing a standardized shipping process, it is essential to remember that a reverse of the process is a significant component of ecommerce. Customers expect free returns. However, a “free” return can be expensive for a warehouse.
According to research published in the International Journal of Physical Distribution & Logistics Management, “The cost of a return is approximately 17% of the prime cost,” with product handling and transportation accounting for most expenses. Establishing an efficient process for inspecting, restocking or disposing of returned items will help lower costs by eliminating any reverse logistics confusion.
Warehouse management ideas
There is not one single manual for how to operate a warehouse. However, some established best practices can help warehouse managers better communicate and improve employee performance.
Performance metrics
Establishing standardized processes is just the first step. You also need to ensure that those processes are effective and continue to streamline operations. For that, it is imperative to establish some key performance indicators (KPIs). Some typical warehouse KPIs include:
- Order fulfillment rate.
- Picking accuracy.
- Inventory accuracy.
- Inventory turnover.
- On-time delivery.
- Shrinkage.
- Receiving efficiency.
- Total order cycle time.
- Fulfillment accuracy rate.
- Rate of returns.
The collected data will help you see what’s working, identify areas that need improvement and establish performance goals.
Regular team meetings
Effective communication across all aspects and warehouse departments is essential to successfully streamline your inventory intake, storage and order processing. Let’s examine some ways to get those colleagues gabbing.
One of the best ways to encourage communication is to, well, sort of force it to happen. We’re being a little lighthearted, but the truth is that there are good meetings and there are bad meetings. Almost everyone is familiar with sitting around a conference table for an hour (or more) listening to a lot of words and leaving feeling like you know less than when the meeting started.
Don’t have that kind of team meeting. Instead, bring everyone together and mainly let the staff lead the meeting. You may want to ask a few team leaders and managers to be ready with some thoughts to get the conversations rolling.
When conducted with an open, judgment-free approach, regular team meetings provide an excellent opportunity for warehouse employees to discuss challenges, share best practices and provide updates on warehouse performance. Not only will these meetings foster a sense of teamwork, but they will also help to ensure that everyone in the warehouse is aligned with the same objectives and goals.
Cross-docking
Are there certain products that spend minimal time on your warehouse shelves? Perhaps they don’t need to spend even that small amount of time in your facility.
Cross docking is a strategy that virtually eliminates the need to hold inventory. Products are delivered to a warehouse, sorted and prepared for shipment immediately. Identify any items that can be directly transferred from inbound shipments to outbound trucks to reduce handling and storage costs.
Seasonal inventory planning
Most warehouses face seasonal requirements when inventory peaks (October-December-ish comes to mind). Utilize that KPI-collected data to predict your specific seasonal inventory fluctuations so you can adjust storage space and organize stock accordingly. That data will also enable you to identify high-demand seasonal items and allocate appropriate storage space to accommodate those increased inventory levels.
Lean principles and continuous improvement
One of the most important aspects of warehouse organization is waste reduction. However, “waste” can come in many unexpected forms and functions, especially when it’s ingrained in familiar and comfortable processes. Identifying various forms of waste can be difficult. Fortunately, there are established methodologies to help streamline operations, minimize non-value-added activities and improve overall efficiency. Integrating these strategies into your warehouse management ideas can help you optimize space utilization, streamline processes, minimize errors, reduce costs and enhance overall efficiency.
The 5S methodology
5S is an approach to creating a clean, uncluttered, safe and organized workplace that reduces waste and optimizes productivity. The methodology was developed in Japan, so translating the original terms into English S-words required some grammatical acrobatics. If some of the S-terms feel forced (i.e., “shine”), that’s why.
- Sort—review all items in a specific location and remove anything unnecessary.
- Set in order—organize the remaining items by placing them where they are most needed and easiest to use.
- Shine—clean the workplace.
- Standardize—take what worked in the previous three steps to create processes that make it easy to sort, organize and clean the workplace.
- Sustain—make a habit of following the previous four steps.
An adaptation of this methodology includes “Safe” as a sixth S to encourage a healthy and secure workplace.
Kaizen events
A kaizen (roughly translates as “change for good”) event is a brainstorming session focusing on a single challenge where employees from different departments brainstorm ideas and test new approaches to discover new ones. The intended outcome of a kaizen event is to improve an existing process.
Anyone can participate in a kaizen event (employees, managers, C-suite executives, etc.) as long as they know about the topic and have a stake in the outcome. Kaizen events often focus on eliminating waste or streamlining a process. An example may be discovering the steps to eliminate from your intake and shipping process to implement cross-docking. Conducting regular Kaizen events can help you identify process bottlenecks and implement improvements.
Successful warehouse organization and management rely on effective planning, implementation and monitoring. The perfect system does not happen overnight. It is a continuous process that requires careful attention to warehouse layout design, stock arrangement, inventory management, shipping department organization and warehouse communication.
Of course, every organized warehouse requires a forklift fleet running at peak efficiency. For all your forklift repair and maintenance needs, please give Texas Motive Solutions a call at (888) 316-2459. We also offer a complimentary forklift fleet performance analysis to guarantee you have the correct batteries for your needs, and our preventive maintenance program keeps your fleet running at its highest performance.
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