45 Proven Ways to
Cut Warehouse Costs

Today, more than ever, distribution professionals are being asked to trim warehouse costs while providing an ever-increasing level of customer service and quality.

Think you’ve wrung all of the costs out of your warehousing or distribution center operation? Take another look &mdash: even in the best-run operation, there’s generally still room to cut costs.

And you simply can’t afford to postpone cost-cutting efforts. Companies in the past may have had patience with under-performing or ineffective facilities, inefficient methods of storage, or less than optimal levels of productivity. But for most, this is no longer an option.

Distribution Center Management talked with over a dozen DC managers and warehousing experts who identified real-world techniques you can use to cut costs without reducing service levels. Here are some of their best suggestions grouped into five categories: Labor management, operations, equipment, facilities, and technology. Any one of these ideas can produce thousands of dollars in savings. However, when combined into an overall cost-containment program they can often reduce costs by two, three or four times that amount.

But, proceed with caution. As Jim Tompkins, president and CEO of Tompkins Associates notes, “Cutting costs while boosting profits is like a riddle that everyone is trying to solve today. The answer is not to cut 10 percent across the board — but to break costs down into meaningful categories and analyze them to ensure that you are not slashing certain valuable areas just for the sake of needing to cut, cut, cut!”

Following are three sample tips from the text, which illustrate the range of cost-cutting strategies in 45 Proven Ways to Cut Warehouse Costs.

• Focus on error reduction. One of the best ways to save money is to improve the overall quality of your operations by reducing error rates. In some companies, managers have seen errors account for as much as 15 percent of DC costs.

Entering the wrong stock unit, picking the wrong product, not loading the truck properly — all of these things add up. Collect data on where your errors are occurring and set targets to reduce them. Try posting errors by type, so workers know what types of problems are being made and with what frequency. But don’t focus exclusively on the negative: Post the names of workers with the fewest number of errors, too. When you highlight good performance as well as problems, and support workers as they begin focusing on quality, those error rates will start going down.

• Make equipment do double-duty. At OHL’s Indiana DC, workers do a lot of cluster picking to save labor time. But the DC was able to further enhance cluster picking by finding new pick carts that incorporate pick totes, a ladder, and a push cart all in one. Where workers once walked the DC floor pushing their carts, they now drive the carts and stand on them or use the attached ladder to pick orders. It eliminates the need for pallet riders, pick carts, and separate ladders. “This one machine basically eliminates all that other equipment,” Mike Honious says. “Not only did we see $15,000 in labor savings, this one piece of equipment was much cheaper than other options and we saved $8,000 by buying it.”

• Warm up with dock blankets. Many warehouse docks are fitted with metal plates to withstand the daily wear and tear of loading and unloading freight. Murphy notes that, “While these docks are outfitted with insulating bristles to keep out the elements, the metal dock plates emanate cold air during winter months like ice cubes in a drink.”

There’s a simple solution to help keep the dock areas more comfortable and reduce heat energy consumption. Murphy recommends, “Custom-sewn, quilted blankets. These blankets cover the metal dock plates when they are not in use. While it does require additional steps for staff to keep the dock blankets in place, it’s not an uncommon sight to see a forklift driver stop what he is doing as he passes the dock and make sure the blanket is in place. These blankets can make dock areas 10-15 degrees warmer, with no additional energy used.

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