Is your warehouse (or stockroom) too big or too small? Is it being used 
effectively? These are critical business questions because warehouse space, the cost of owning and operating that space, and the inventory stored therein are a major part of operating costs for most businesses. We have warehouses because we need to store parts, materials and finished goods. I’ll discuss ‘why we have inventory’ in my next article. For now, let’s just assume we have it and go from there.
Most companies will add warehouse space time and time again – but seldom if ever reduce the storage space unless the business takes a dramatic downturn. Inventory tends to grow over time, especially if the business is growing. But often that inventory growth can be reduced with smart management practices and inventory can grow more slowly than the increase in business volume. It just takes work to do that but it pays off handsomely in reduced carrying cost and reduced need for those repeated warehouse expansions. And if things change, there will be less obsolete inventory to deal with.
The first objective should be to get the most from whatever space you have. Various racking and storage systems can be set up to effectively use whatever space is available, but physical racks tend to be somewhat inflexible and are expensive to buy, install and change. Computerization can help. A warehouse management system (WMS) is software that can do what’s called directed put-away. The system will suggest where to put incoming goods to maximize the use of available space as well as locate things in the most convenient place for easy picking: fast moving goods near the front and slow movers in the back, for example. WMS can also track shelf life and enforce first-in/first-out, use-up quantities, and other inventory management schemes. Directed picking minimizes labor and ‘mileage’ up and down the aisles to make handling as efficient as possible.
Using a WMS to manage your inventory requires a random location approach, meaning that you won’t necessarily know where anything is, should the system be unavailable. Without automation, most people will put things in pre-assigned locations – convenient for finding what you need but not good for effectively using the space.
Today’s warehouse is much more than just dead storage. Companies now leverage the space, people and equipment in the warehouse to deliver added value. Lindt & Sprüngli AG in Stratham, New Hampshire makes chocolate, for example, and stores its delicious truffles in bulk, in large bins. They are not put into retail bags and boxes until ordered by the store. Final assembly (truffles into bags of the proper size and assortment, bags into shelf packs, shelf packs into cartons) takes place in the warehouse, adjacent to the shipping area for quick turn-around and efficient handling. The interesting thing about this approach is that it can take place in a remote warehouse, providing customized products or packaging and quick delivery to customers far from the manufacturing plant.
Warehouses can provide other value-adding services that reduce customer lead time, provide significant inventory savings and flexibility, and enable powerful manufacturing strategies known as mass customization and postponement.
The warehouse can be much more than just space to put things. In addition to maximizing the use of that space, manufacturers, distributors and retailers can look for ways to turn that cost center to a profit maker.
Reprinted from Portsmouth Herald / Seacoastonline.com – October 21, 2014