The War on Warehouse Costs

What is the most frustrating aspect of the distribution business? Among ours at Rapid, in no particular order, are picking errors highlighted by customers; delays to customer orders; waiting for stock to arrive that does sell, and having your warehouse cluttered with stock that doesn't.

Almost 40 per cent of UK companies with stockholding operations rank stock level optimisation high on their priorities, according to a survey of warehouse operators carried out for leading WMS provider Access Delta. 

The accompanying whitepaper, Space and stock: the financial frontier', suggests many businesses without a WMS are missing out on a relatively easy route to reduced cost and improved service. The survey of around 130 warehouse and distribution managers highlighted the challenges facing businesses, such as the issue of waste, the popularity of Pick and Pack functionality, optimising stock levels and space usage.

This infographic summarises the key facts of the survey.

The key finding highlights that business maturity may have a large part to play. Larger, more established businesses tend to have established and robust processes from point of order to point of despatch: with these in place, stock level optimisation in relation to order and volume patterns is an obvious next step, with clear benefits for cash flow amongst other criteria. Smaller and newer businesses are often more focused on the need to grow the business and meet every customer demand, in the hope of repeat business and an enhanced service reputation.

The whitepaper highlights that small businesses are particularly vulnerable to short term cash-flow problems, and sub-optimal stocking levels, with insufficient stock in some lines leading to lost sales, while too much working capital is tied up in slow-moving lines - providing a very sound recipe for cooking up a cash flow crisis.

With stock levels optimised, it becomes possible to think rationally about optimising space utilisation. The survey finds that three quarters of respondents are not doing it very well or efficiently, demonstrating there is enormous room for improvement. Warehousing space is not cheap, and the apparent need to increase storage area can be a real brake on company growth.

Rob Hodgson, supply chain divisional sales manager for Access Group, commented, "Companies who optimise their stock levels often 'discover' significant volumes of stock that they didn't know they had available. When this has been cleaned up they may find they no longer need to expand their warehousing space. And this can mean a serious cost saving."

"The survey and respective whitepaper highlights that regardless of size, companies need to go far beyond their current thinking to discover the benefits of optimised stock and warehouse space", continues Rob. "A WMS that can integrate financial visibility and other key functions across the operation will bring greater benefits both to cash flow and customer service."

This post has been produced with the assistance of Access Delta, a provider of Warehouse Management Solutions.