Signet's top tips for creating cost savings in your warehouse
Creating long-term cost savings is vital. However, without balanced and level workflows, they can be difficult to achieve. If inventory, vendors or freight company processes are not managed effectively, it could feel as though you are constantly "firefighting".
At Signet, we are continually striving to create smooth, balanced and realistic workflows (also known as "Heijunka") as part of our own Continuous Improvement journey.
When implemented correctly, there are fewer overwhelming spikes of activity, effective cost management processes in place, evenly distributed processes and less "firefighting". When "smoothing out" your own workplace processes, inventory management processes and vendor or freight company processes are good places to begin.
Minimise the number of items you stock
One way to create and sustain balanced workflows is to reduce the number of items that you need to stock and purchase smaller amounts more frequently, instead of a large amount irregularly. Doing this has a number of benefits, including:
- Reduced risk of stock becoming obsolete – holding large amounts of stock that may go unused or unsold is an easy way to accumulate costs. Writing off a large number of items that haven't met the expected level of demand can also require large chunks of time, and the process itself can become hard to maintain. Unnecessary stock can contribute to those overwhelming periods of activity mentioned above.
- Reduced Carrying Costs – when evaluating your inventory costs, you need to remember that every item costs more than its price tag. Overhead costs, such as rent, electricity and picking costs, need to be considered. Remember that carrying costs shouldn't go beyond 20% of your total inventory costs.
Implementing visual cues, such as Kanban systems, is another way to keep track of your stock levels. Placing a mark on containers that hold earplugs, safety glasses or safety gloves to indicate when the item needs to be reordered is a simple and effective inventory management tool. Visual cues provide other benefits, such as:
- Time savings when reordering.
- Fewer backorders or halts in processes – knowing when your earplugs, safety glasses, safety gloves or general packaging supplies need to be reordered before you run out can reduce the need for costly express deliveries or alternate suppliers.
Know the vendors and freight companies you are working with
There are a number of factors to consider when generating cost savings from your chosen vendors or freight companies.
Key factors to look at are your items cubic costs and deadweight. As many freight companies charge based on standard cubic factors of 250 or 333, you could be charged more than you expected.
If your items dead weight is less than the cubic weight (cubic dimensions multiples by the carriers charge weight e.g. 1m3 x 250 = 250kg), you will be charged the greater of the two options.
Knowing if your item has cubic sensitivity is key to ensuring that freight is costed accordingly. If you know your items cubic factor, you may also be able to negotiate a better rate or ensure standard cubic rates (250 or 333) are always met.
To further balance your workflows and create cost savings, you could also reduce the number of carriers you use. Using multiple carriers could mean a number of deliveries daily, half truckloads and smaller, inconsistent spikes of activity. By consolidating your carriers, your warehouse team will know when goods will be arriving and a full load will usually be delivered.
Incorporating "Heijunka" into your workplace can be done in a number of ways – we have only named a few! By carefully looking at and effectively managing all of your inventory, vendor and freight company costs, generating long-term cost savings becomes a lot easier.