How to create a high performing, low cost warehouse for your wholesale distribution business
The warehouse is at the heart of every wholesale distribution business. So why are so many wholesale distributors bleeding money by writing off stock that hasn’t sold or has become obsolete?
And if you’re an owner or advisor to one of those companies, how can you streamline your warehouse management, reduce your costs and attack those write-offs head on?
1. Start with reporting
Even before you put warehouse cost reduction measures into place, you need to get your reporting right.
It’s important to have an accurate snapshot of your warehouse costs and performance to get a benchmark for improvement. Once you put any improvements into practice, you’ll want to re-run your reporting and compare that data with your benchmark.
Consider using a small business software solution such as a cloud ERP system to help with reporting and process improvement.
2. Overstocking can be overwhelming
Overstocking of items is one of the biggest pain points for wholesale distributors, with many writing off large amounts of unsold, expired and/or obsolete stock on a regular basis. This is usually a symptom of not understanding your true stock position and the changes in demand.
Start by putting a system in place which shows your stock position in real-time, providing easy, reproducible reporting to help your inventory management.
The key factors here are understanding which stock is fast moving, which is slow moving and whether your pricing on those items reflects your inventory management costs. Could you price slow moving items a little higher, given their low demand or slow turn-around time?
You can also go a step further by setting up demand forecasting and let your small business software solution help with predicting the of ebb and flow of demand for different product lines.
3. Forecast ahead
To improve your warehouse management processes even further, you can also look at demand forecasting. For most businesses, there are generally times of the year which attract increased demand for certain items, such as Christmas, seasonal trends, or after a successful promotion.
A small business software system which includes demand forecasting can predict fluctuations in the sales of your items and adjust the automatic re-ordering to fit the demand.
4. Re-Order automation
Automating your re-ordering is often a significant win you can make to reduce warehouse management costs. Firstly, you save on the administrative time and costs of having someone physically checking stock and punching in the numbers. This means you can reallocate your purchasing staff’s time to more intelligent business requirements – like understanding and making judgements on stock trends.
You’ll also reduce the risk of human error, and maximize your stock efficiency.
You can set up minimum quantity and re-order points for your items which trigger the purchase of items to suppliers whenever those levels are reached.
5. Consolidate shipping
Shipping can be one of the biggest costs for wholesale distributors. When looking at ways to reduce your warehouse costs, there are two sides to consider:
- the shipping you’re paying suppliers to get products into your warehouse
- the shipping costs to send those products to your customers.
To make sure you’re getting the most cost effective shipping from suppliers, talk to them about consolidation. What does this mean?
Well, if you’re ordering multiple different product lines, some suppliers will send out individual shipments as each product line comes into stock. This can result in multiple shipment charges. Depending on the system your supplier is using, they may be able to offer options like complete order shipment, which wait until all products on your order are in stock before shipping everything together.
Alternatively, they may have an initial part shipment option, where anything that’s in stock immediately will ship right away, and a second shipment will be initiated once all the backordered items are in stock together.
6. Step up your stock locations
There are some clever process improvements you can make just by changing the physical location of your stock which can help with warehouse management. Physically move your high frequency stock closer to where your pick and pack staff move orders to reduce the number of steps they take.
If you can save your pickers 20 steps for each product picked 50 times per day, that’s 1,000 steps and a whole lot of time and energy saved instantly. Similarly, you can group items which customers often purchase at the same time so that your staff only need to go to one spot in your warehouse for order fulfilment.
The right reporting to give you these insights is imperative. It’s the first step (pun intended) to making any process improvements and will be the key to knowing which products are your top movers.
7. Fix your receipting
The receipting process can be a major source of human error if it’s not done correctly. Do your warehouse staff have an easy way to look up purchase orders and confirm what’s been received, before allowing the stock to be added to your inventory? Or are you leaving yourself open for incorrect inventory levels and missing stock which may need to be written off?
8. Embrace eCommerce
Having a great eCommerce channel which offers an engaging customer experience can encourage customers towards self-service ordering and order management. Not only will they be empowered to view product information, compare items and place orders directly, but if you’re using the right system, they’ll also be able to view their complete order history and track order statuses in real-time.
This saves in admin time, and means your customers get the right information when they need it – whenever and wherever they may be.
For further ideas on managing a successful eCommerce channel and using it to grow your sales, have a look at our blog The Art of Growing Your eCommerce Sales.
Summary: with smarter warehouse management, you can reduce warehouse costs
We’ve gone through some of the most important areas to improve processes and reduce warehouse costs, but there even more to be discovered. It all starts with having the right small business software providing the right data and insights, and in-built processes to make it happen.
If you’re not sure whether your current systems are up to the job, talk with a JCurve consultant. They will take the time to understand your business and work with you to reduce costs, increase your profits and grow your business.
