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Migrating Your Warehouse From Cost Center To Competitive Differentiator

Posted by Harriet Schneider on Jan 10, 2023 2:23:49 AM

Many organizations tend to view warehouse operations as cost centers due to the labor, equipment, and physical inventory. However, with business models rapidly changing through e-commerce, omnichannel, curbside pickup, 3D printing, and more, warehouse operations empower a company to gain a competitive advantage by ensuring customer loyalty and brand excellence stay intact as products enter the last mile.

Common warehousing challenges

Warehouse directors understand the challenges most, if not all, distribution centers manage. These challenges cover a wide range of issues which include picking optimization, inventory management, operational strategy, employee management, returns, and much, much more.

Picking challenges

For example, a large amount of productivity is often lost due to insufficient item master data. Poor inventory placement across the warehouse can result in increased costs and reduced productivity without the correct item and location slotting for concepts such as seasonality, promotional activities, and sales projections.

Furthermore, many companies lack visibility into inventory quantity and location accuracy due to a heavy reliance on spreadsheets, pick sheets, the absence of cycle counts, capacity constraints, or a lack of digital monitoring together. No visibility into inventory quantities or throughput can result in declining fulfillment rates, stockouts & backorders, decreased service levels, and waning customer loyalty and sales opportunities.

 
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E-commerce continues to change the game.

While e-commerce has created numerous challenges and adjustments to warehouse operations for years, increases in e-commerce activity sparked by 2020 shutdowns and safety protocols have expedited the need for near-instant adjustments, scalability, and the introduction of new business models.

To match the speed of digital business, warehousing is expanding into localized areas as space previously utilized as storefronts is emerging as smaller, localized fulfillment centers. This allows the organization to offer curbside pick-up, same-day delivery, and more. As newly adopted customer behavior becomes permanent, more and more organizations will continue to explore and implement this model.

Persistent labor shortages

Before 2020, a warehousing labor shortage has been a consistent challenge. As a result, many organizations are increasing their headcount to meet demand and ensure enough employees are available if someone requires an extended absence due to illness or injury. To adapt, organizations need to implement advanced scheduling strategies, employee health checks, and routine sanitation schedules to ensure safety measures are maintained to keep the warehouse running smoothly.

Implementing a cost-to-serve model

As more customers expect specialized or customized services, the need to segment operations and evaluate cost-to-serve models can be the difference between sustainability and profitability. With more and more organizations seeking to outsource fulfillment operations to third-party logistics service providers, determining what to charge for specific services and requirements is critically important. However, many organizations have yet to adopt a true cost-to-serve strategy and continue to render “blanket pricing,” leading to higher fulfillment costs and lower revenue.

Increased need for streamlined reverse logistics due to returns and recalls

As online orders increase, so have returns. For example, a customer may order the same clothing item in multiple sizes with full intent on returning all but the one that best fits. The fulfillment costs and return management costs will far outweigh the revenue associated with that order. In the case of returns, having a reverse logistics strategy to ensure items are properly marked for resell, repair, or recycling will maximize the product’s lifecycle and lower total cost.

While these challenges have been prevalent for several years, many organizations have yet to address them head-on or at all. For organizations looking to improve warehouse operations to drive additional value, now is the time to explore the right strategies and tools to take the necessary steps.

And, as always, contact ICCG to help provide you with insight and information. Schedule a complimentary consultation to review your questions.

 

Topics: ERP, Distribution, Supply Chain, Warehouse Management Systems, Supply Chain Network, Cloud BI, Enterprise Asset Management, Enterprise Software, WMS

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Embracing thought leadership as a pathway for growth, represents the true spirit of progressive change that will make a difference in technology-driven industries. As a consulting company, ICCG customers look to us as their value-added resource. They expect us to be proactive about solving their immediate challenges and we don’t take that responsibility lightly. It is this that drives us to share our best practices, knowledge-base, years of experience, and tried and true methodologies. These have been the hallmarks of our corporate brand.

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