This warehouse frightens me … still
Has me tied up in knots …

Dave Matthews Band

And, as per our damnation post, if your warehouse doesn’t frighten you, obviously you haven’t taken a really good look at it. The warehouse is responsible for inventory, and inventory is very costly … even when it is well managed. Many studies of inventory (carrying) costs have estimated inventory costs to be 25% of the value of the average inventory level (or more). That’s huge!

But this is not the only reason the warehouse is a damnation. It is also a damnation because the warehouse controls:

• product availability

  and can take their time unloading product, packing product, shipping product, etc.

• the final quality check

  and if they get lax, and don’t independently test the spinach, your company could be blamed for the next salmonella outbreak that is actually the fault of your supplier

• overhead costs

  inventory, operations, etc.

So what can you do? Let’s start with the obvious:

JiT (Just in Time) Inventory

The less excess inventory on hand, the less inventory carrying cost, the less inventory for the warehouse to lose or damage, and the less overhead cost to consider.

VMI (Vendor Managed Inventory)

Sometimes your vendor can manage inventory better than you can, and if their revenue is dependent on good management, they are very incented to manage it well.

But that’s just the start. You can also:

Get (a) Lean (assessment).

Identify the inefficiencies, and make sure something is done about them to keep efficiency up and overhead costs down. Make sure the organization is focused on lean transformation and continual process improvement.

Get external audits (on operations and inbound product).

Not only to keep the warehouse in check but to help them identify areas for improvement.

Get the Warehouse Training.

It’s not only Procurement that never has enough in the training budget, it’s the warehouse too. Management thinks that because it’s a manual job, it’s a low skill job and little training is required. Maybe, but considering that lean, six sigma, and kanban processes can greatly improve efficiency and minimize costs, it doesn’t hurt to make sure that the processes, and the labour implementing them, have all the knowledge they need to be as efficient and effective as possible.