4 Reasons Why You Should Audit and Assess Your Warehouse
Small and medium-sized wholesalers are the backbone of most economies. While larger and multinational wholesalers are typically focused on reporting quarterly or semi-annual financial figures, traditional wholesalers aim for greater efficiencies. Why? Because even a small change or tweak can produce a bigger result that is keenly felt by small and medium-sized businesses.
Here we’ll focus on the “why” and not the “how” as there are many warehouse consultants who will gladly do an independent audit and assessment for you. The act of doing a complete warehouse audit is beyond the scope of a single blog post. Focusing on the “why” also helps to justify why you should invest time and money in regular warehouse audits.
Why We Do Regular Warehouse Assessments
As a wholesaler in a competitive industry and running on razor-thin margins, what really separates you from the rest of the pack? Products are rapidly getting commoditized. So why should one customer choose your products over another? Low prices are definitely a factor but it’s little comfort for a retail buyer if these low prices mean constant stock-outs.
So what really gets a retail customer coming back to a wholesaler? We think that it is simply fantastic customer service and an on-going business relationship. Wholesalers might not desire or even want a customer that shops purely on price. This means a short-term relationship that ebbs and flows with prices. Here today, gone tomorrow.
Most wholesalers would want customers that stick around and buy in increasing quantities. You create this “stickiness” by improving your order fill rate, for example. Customers love wholesalers who maintain a consistently high order fill rate. Other ways might be ease of ordering and purchasing. Or simply just a good, trusting business relationship.
Things to Consider for Warehouse Auditing and Assessment
So it stands to reason that warehouses are critical to every wholesaling business. If you’re suddenly seeing damaged stocks at your warehouse, what could it be due to? Is it the attitude of your employees who stack and pack them haphazardly? Or could it be the physical facilities themselves? Thus we audit warehouses and inventory for a couple of reasons.
The overall reason we argue is customer satisfaction and service. Above your products, this is the one thing that separates you from your competitors. Customer satisfaction is arguably a combination of staff, facilities, workflows and technology working seamlessly together to deliver a positive buying experience. We’ll cover all of these next.
Some Reasons for Regular Warehouse Audits
A first reason is ensuring a high morale, productivity and attitude with your staff. Humans, unfortunately, are the weakest link in your grand scheme of things. You could very well have a state of the art inventory management system with a designer warehouse. But all these can amount to naught if your warehouse staff constantly pick-and-pack the wrong items.
Reason number two is improving operational efficiency with your workflows and processes. A regular review of how a sales order travels through your business gives you a critical insight into how orders are fulfilled. And how much time they take to ship out. In fact, numerous inventory ratios exist to benchmark how fast you fulfill and ship orders.
Number three is reviewing your physical facilities. It can be an expensive and capital intensive exercise to give your warehouse a makeover or remodel. However, taking a critical look into how your staff moves in the warehouse, and how products are stored, picked and packed may justify the time and expenditure in reviewing your warehouse.
Finally, the final reason is another powerful competitive advantage — the effective use of information technology in your wholesaling business. If you’re using technology in your workflows and processes, are you using them effectively at all? Or if you’re looking at adopting a technology, what should use or buy within your budget?
1. Motivating Employees
Like any business that employs humans, your employees are the most important assets in your business. They walk out the door every evening and return the next morning. They are fragile, made of tissue and bone and they sometimes act in uncertain ways. But most of the time they perform specific duties and more in return for a salary and job satisfaction.
Your employees can be benchmarked in terms of their job output and productivity. For warehouse and fulfillment staff, it’s very clear-cut and quantifiable. You can measure productivity by work units done in a given amount of time. It can be measured by various indicators such as the number of orders, shipments, lines in an order and so on.
With these inventory indicators in hand, are your warehouse employees working consistently to grow these numbers over time? Or are they stagnating, or even degrading their performance? A constant or negative trend is a warning sign to address your productivity issues immediately. Talk to your staff. Ask for feedback. Could things be done in a better way?
Turnover and training can also be another way to assess your workforce. And indirectly it’s also an indicator of job satisfaction. It’s already costly to hire staff. And it’s even more costly to hired skilled staff. Are you hiring the right people in the beginning? And what training and development plan do you have for them in their career with you?
Get the Right People From the Start
Hiring the right people at the start can resolve many human resources issues later on. Are they in the industry and job for the right reasons? Where do they see themselves in 5 years time? Do they have the right customer-focused attitude to deliver good work every time? Do they want to improve themselves through in-house training and perhaps further studies?
Finally, don’t forget that your information systems are only as useful and good as the people using them. If they don’t get used for whatever reason, including fear, difficulty, complexity or just plain ignorance, then you’re not getting the best out of your technology investment. Motivate your staff to adopt and use an inventory management system.
2. Reviewing Workflow and Processes
In comparison with human resources, your business processes and workflows are relatively easier to identify and work with. You only need to spend a day with an employee or a department to see their daily workflow. You can map tasks and steps for all to see. The ultimate aim here is to reduce the number of steps taken to do certain tasks.
In warehouse terms, you want to aim to minimize the number of times an item is handled by employees, and the number of steps it takes to move the item through your business until it is shipped out. It’s about cutting unnecessary steps, removing paperwork altogether and digitizing all processes where possible with information technology.
Physical Steps Can Be Reduced
And for warehouses, in particular, a good portion of productivity can be improved by even looking at the number of physical steps it takes to receive, unload and store goods. And also to review the routes to pick-and-pack items, load and ship orders out. This may involve reviewing the physical layout of the shelves and tables in the warehouse itself.
In detail, you want to see how items move from receiving and returns at the warehouse dock, the unpacking and counting procedure, and then the storing of stock as they are replenished at your shelves or baskets. Conversely, you want to map how pick-and-pack lists are generated, how items are retrieved from storage shelves, how orders are prepared at packing tables, and finally how long it takes to ship them out.
And, finally, as you guessed it the human element is important here for a reason. You should uphold quality control in the picking-and-packing process and not wait for an influx of returns and exchanges for poorly packed or incorrect orders. This means installing a “get it right first” attitude in your warehouse staff.
3. Improving Physical Facilities
Whether you own or rent your warehouse space, the monthly rental and depreciation costs are likely to be sizeable components of your expenses. So are you using the space in an efficient and effective way to stretch your rental dollar and maximize your storage space? You could go the DIY route but it would be worthwhile to get a fresh pair of eyes to independently review your warehouse layout.
Firstly, look at the proportion of the warehouse space used for storage, receiving, unloading, picking and packing, and administration. The bulk of the space should ideally be storage space followed by picking and packing tables. You should place receiving and unloading docks in a logical flow from the pick-and-pack areas.
Also, don’t forget the seasonality effect on your warehouse. Activity in your warehouse is likely to be different during Black Friday and Christmas compared with, say, the first week of January. While it might contradict conventional reasoning, observing your warehouse activity during the busiest season is a stress test of sorts.
And Remember General Housekeeping…
Another indicator that is often overlooked is general housekeeping and cleaning of your warehouse. You might not have a designated repairman for the facilities or you might prefer to outsource repairs in an ad hoc manner. Nonetheless, regular upkeep is important for safety and productivity purposes.
Think about it. The costs and risks of operating a warehouse go up as your housekeeping standards go down. Flickering lights are the stuff of horror movies but a bane for warehouse staff who have to endure inconsistent lighting. Poor signage, slippery floors, and ill-maintained toilets add to workplace accidents and a drop in staff morale. Damp, humid or overly dry conditions can affect your stock and thus damage and write-offs.
4. Using Information Technology
And we come to the last reason for conducting regular warehouse audits and assessments. If you’re using technology, are you using it in the “correct” way? If you’re considering adopting technology or upgrading an existing system, are you maximizing your return on investment in a warehouse management system (WMS)?
There are all sorts of software and hardware solutions for effective warehouse management. The aim here is to maximize the use of your physical space and improve the efficiency of labor with technology. Some solutions focus exclusively on WMS and include labor scheduling. Others are inventory management solutions paired with barcoding technology.
The Question of Build or Buy?
At the end of the day, pick a software and/or hardware solution that works best for you and your business. If you’re going the DIY or custom software route, remember that you are solely responsible for supporting and upgrading your own solution. This can be prohibitively expensive in the long run. But you get a solution that is tailored made just for you.
On the other hand, using an off-the-shelf solution does trade off some custom functionality. But better software packages are modular in nature and are adaptable to most businesses with little need for custom coding or development work. This slight tradeoff means a lower total cost of ownership. And it typically involves a subscription-type software that’s easy on your finances.
Inventory Management Functions Are Critical
At the heart of any WMS should be inventory management software (IMS) such as EMERGE App. This is a must. Any software solution must do this well before any other bells and whistles features can be considered. At a minimum, any IMS software should be able to track your products by SKU, quantity, orders, purchases and warehouse locations.
Barcoding technology is another must for any modern warehouse. Barcode printing and scanning solutions may take some effort to set up. But you need only do it once. Once setup barcode scanning dramatically reduces the incidence of human errors as the items make their way through your workflow.
And to ensure continual customer satisfaction, your IMS should be able to handle returns and exchanges with ease. This adds a lot to customer confidence if they can return and exchange products with minimal fuss and with a generous returns policy.
In the daily scheme of things, it can be easy to overlook doing a regular review of your warehouse and inventory systems. After all, it’s a cost center and it can be inconvenient and expensive to “fix” what is already working well for you. But something that’s good today can be better tomorrow. Take a good look at your staff, business processes, warehouses, and technology systems to get an advantage over your competitors.