10 Warehouse Layout Optimization Mistakes
A common misconception companies harbor is the idea that profit relies solely –or even mainly– upon sales. While sales are undoubtedly a crucial activity for any business, managing costs and expenses plays an important role as well.
Poor inventory control, for instance, can result in product shortage, loss of sales, low efficiency and other collateral consequences such as work safety hazards. Proper management of a warehouse is the first step in having lower costs and therefore increased profit.
Warehouse layout optimization may sound like an unattainable ideal or a tricky concept, when in reality it’s a compilation of common sense rules that make processes leaner, save money and make your life easier. Here are the ten warehouse organization mistakes that most companies make:
1 – Excess Inventory
Despite lean practices, wholesalers in particular often fall into this trap. With the intention of taking advantage of bulk quantity price reductions, they purchase vast amounts of a single product that sits indefinitely in their warehouses.
Grainger’s principle regarding inventory proposes: “there’s a limited period in which one can use and sell inventory to maximize profits.” This is due to several reasons: a) the dollar value of the inventory diminishes as time passes, b) when applicable, perishable goods may get spoiled and therefore cause a loss, and c) products may become obsolete, lost or stolen.
Another major drawback is that if your warehouse is full to capacity, your employees may struggle to retrieve goods and fill orders, thus making your process inefficient.
Instead of focusing only on stocking, companies should work on warehouse layout optimization with acceptable levels of inventory correctly organized. To put it simply – think of stock as a hot potato. Whoever holds it for long gets burned.
2 – Lack of Warehouse Layout Optimization
It’s not about the space you have; it’s all about how you use it. Businesses commonly overlook the need to plan efficient picking paths through their warehouses. Again, it all comes down to common sense. Keep your high-selling or fast-moving products in the front or at the most easily reachable point so lift truck drivers aren’t steadily losing time going around the floor.
The faster and easier your workers can find, pick and send the product, the faster you will receive revenue.
When space lacks organization or the distribution is not optimal, pickers take longer to find shipping goods, which consequently slows the process and creates a backlog. It is easy to create mistakes in design if you plan from a four-walled office. Get to the floor and rehearse, note down times, travel picking paths; put yourself in the shoes of your employees.
Plan your layout according to everyday operations rather than an ideal scenario. In short, be realistic. Warehouse layout optimization may take time and effort, but it is 100% worth it.
3 – Ignoring Staff Development
When it comes to cutting costs, employee training is the first one to suffer since its monetary benefits are not easy to track. No matter how great your plans are, they will not be executed correctly by undertrained, frustrated or neglected personnel. Staff turnover or human mistakes due to poor development often end up costing more than the training itself.
Keep your employees engaged and motivated; assure them their personal growth is essential not only for them but for the organization.
4 – Failing to Plan
Forecasts are a company’s steering wheel – whatever the goals are, the organization should aim accordingly. Forecasts shouldn’t be reduced only to sales; purchasing plans must be elaborated according to predicted sales and available space.
There should be a constant search for an equilibrium that answers these three questions: How much do I need to have to fulfill clients’ orders? What discounted products are worth bulk-purchasing ahead of time? How much space do I have available? By answering them, the company will have a good idea of how to plan material acquirement.
If you have trouble implementing sophisticated material plans at the moment, install “Maximum/Minimum” levels for each product and half of your problems will be solved. You must also take into consideration your supplier’s lead time when doing this. It doesn’t matter if you rarely use a material, if your supplier has long delivery times you may have to sit on some inventory in order to avoid shortages.
5 – Sloppy Housekeeping
Overfilled pallets, chaotic and littered aisles, messy loading docks – all of these are symptoms of poor housekeeping. Efficiency levels fall when it is tortuous to travel around the warehouse. Also, bear in mind the safety implications of not having proper organization and clutter-free aisles. Research has proven that filthy spaces also make workers unfocused and prone to apathy.
Enforce strict housekeeping routines, assign schedules and tasks to the staff and make sure everyone is doing their part. Do not expect the cleaning to happen at the time of production; you must assign a specific period for it. If you spend time and effort on planning your warehouse layout, optimization of the space will become easy, and housekeeping will be reduced to simple tasks.
6 – Poor Warehouse Safety Management
Just because the space is clean doesn’t mean it is safe. Often the most potentially damaging hazards are hidden and not apparent at a glance. What happens commonly is that as long as no accidents happen within a warehouse, safety policies get relaxed and health rules are overlooked due to urgent daily activities.
However, accidents do happen. They are costly, they lower a company’s reputation, and they damage employee morale and sense of security. Some accidents may even be lethal. A single wrong movement by a forklift operator can cause an entire warehouse of goods to fall like dominoes – which, sadly, has happened in the past.
Do not ignore safety in your warehouse. Follow regulations and conduct inspections. It is always better to be safe than sorry.
7 – Forgetting WIP
It is the end of the month, and the pressure is on the outbound side of the operation; everyone is running to fulfill customer orders moving through the warehouse. Meanwhile, no one pays attention to the work in progress (WIP) and after the new month begins there are no finished goods to ship new orders. Sound familiar?
Inbound procedures can be specialized. Therefore you do not want to assign random staff to them. Take the proper steps to balance the cycle and have trained workers feed the WIP.
8 – Not Measuring Performance
A fundamental principle in engineering states that whatever is not measurable cannot be improved.
Awareness of the importance of key performance indicators (KPIs) at warehouses is relatively new – due to which companies fail to do it correctly.
Not every company focuses on the same aspects of the operation; therefore it will be up to you to decide which KPIs must be implemented. Among the most important ones are inventory turnover, order picking accuracy, truck time at the unloading dock, and time from receiving to putting away.
When combined, these four indicators can portray how well your inventory is being managed and what the level of your warehouse layout optimization is.
9 – Failure to Automate
When people hear the word “automation,” they often think of expensive hardware, replacement of human labor and complication of tasks, which can be misleading. In reality, equipment or machines seldom replace human tasks. They mostly just make them faster and more accurate.
If you are still relying on paper-based workflows, most likely you are embroiling your processes, delaying operations and spending money – whether you are aware or not – fixing human mistakes. Digital storage of your inventory records and warehouse operations will make the process more accurate and straightforward. An additional benefit is the reduction of consumables and adherence to eco-friendly practices.
10 – Poorly Identified Materials
Small companies tend to rely on their staff and human resources instead of relying on proven processes. If someone new to the company enters your warehouse and is unable to identify and locate materials, that is a sign that you need to focus on labeling and tagging.
There are countless negative consequences of failing to do so – mislabeling leads to mistakes and data errors (you are considering inventory you do not have and vice versa), and you may ship wrongly to a customer – therefore making them unsatisfied and possibly even risking a fine from them. In certain operations, improper tagging can lead to physical damage or accidents.
Most warehouse label systems are easy to install and use, and improve process efficiency instantly. Invest in a reliable, well-reviewed system that works for your operations.
These mistakes are 100% avoidable when following common sense. There is no hidden trick or complex solution to your space management issues. Organizations must keep their warehouses clean, organized, safe and efficiently distributed.
If you aren’t sure where you stand or what you need to do to optimize your processes further, contact Specialized Storage Solutions for a free operational efficiency analysis. During the analysis we’ll find ways for you to reduce expenses, optimize resource allocation, and regain precision focus on top priorities. You can learn more and request a free analysis on our website.