Running a warehouse is a complex and multi-faceted responsibility. It’s one of the few business disciplines that require physical optimization, analytical optimization, and comprehensive planning. 

We’ve all heard how Amazon’s distribution centers are run like well-oiled machines. They have redundancies for their redundancies and systems that are fine-tuned down to the second. 

That level of optimization may seem unattainable. But this is where the average ecommerce business can really shine.

Smaller ecommerce and warehousing operations are more nimble, have fewer moving parts, and have great opportunities to build out systems early that scale with the business.

Whether you are a seasoned vet or new to running a warehouse, follow these tips to optimize your warehouse, grow your profitability, and ensure present and future success.

What is warehouse optimization and why is it important?

Warehouse optimization is the process of continually refining warehouse operations to achieve maximum efficiency and profitability.

It encompasses a range of strategies aimed at ensuring the most effective use of storage space, enhancing the warehouse layout, and implementing best practices in inventory management.

At the heart of warehouse optimization is the idea of making the most out of available resources. In the context of warehouse operations, this means ensuring that every process, from receiving goods to shipping them out, is streamlined.

Space utilization is one of the biggest culprits of a disorganized warehouse space. If a warehouse is not optimized, there might be wasted space or, conversely, a shortage of space when it’s most needed.

Efficiently utilizing storage space can lead to cost savings, faster processing times, and the ability to handle more inventory.

Your warehouse layout plays a critical role in this optimization (we’ll talk more about this in the next section).

A well-planned layout ensures that goods are stored in a way that makes sense, both in terms of the kind of items and their frequency of access.

For instance, items that are frequently picked should be stored closer to the dispatch area. Optimizing the layout can lead to reduced travel time for warehouse staff, faster order processing, and, ultimately, improved customer satisfaction.

Lastly, the cornerstone of an efficient warehouse is robust inventory management. Proper inventory management ensures that there’s a balance between stock levels and demand.

Overstocking can tie up funds and waste storage space while understocking can lead to missed sales opportunities. An optimized inventory system helps in forecasting demand, determining reorder points, and preventing stockouts or overages.

What are the other benefits of warehouse optimization?

Warehouse optimization, while primarily aimed at maximizing storage space and operational efficiency, brings with it a plethora of additional advantages that can greatly enhance the performance of a business.

Greater inventory visibility

One of the foremost benefits is the increased visibility of inventory. With an optimized warehouse, businesses have a clearer picture of what products they have, where they are located, and in what quantities.

This visibility reduces the risks of overstocking or stockouts, allowing for better decision-making regarding reorders and stock rotations.

Improved picking accuracy

Mistakes in the picking process can lead to costly errors, such as sending the wrong product to a customer or miscounting inventory.

Through warehouse optimization, businesses can establish systems and workflows that enhance the accuracy of picking, ensuring that customers receive the correct products on time. This not only reduces return rates but also boosts customer satisfaction.

Streamlined warehouse operations

An optimized warehouse is like a well-oiled machine – every process and function is designed for maximum efficiency. From the moment goods are received, to their storage, and finally their dispatch, every step is streamlined to eliminate wastage of time and resources.

This results in fewer hiccups and delays in the warehouse, leading to smoother overall operations.

Fulfill orders faster

Perhaps one of the most tangible benefits for the end customer is the speed at which their orders are processed. In an optimized warehouse, the time between an order being placed and it being ready for dispatch is drastically reduced.

This efficiency not only delights customers but also gives businesses a competitive edge in a market where delivery times are becoming increasingly crucial.

Those are the basics. Now, let’s get into some more tips to help you further optimize your warehouse management system.

7 best warehouse optimization tips

Running a warehouse is a complex and multi-faceted responsibility. It’s one of the few business disciplines that require physical optimization, analytical optimization, and comprehensive planning. 

We’ve all heard how Amazon’s warehouses are run like well-oiled machines. They have redundancies for their redundancies and systems that are fine-tuned down to the second. 

That level of optimization may seem unattainable. But this is where the average ecommerce business can really shine.

Smaller ecommerce and warehousing operations are more nimble, have fewer moving parts, and have great opportunities to build out systems early that scale with the business.

Whether you are a seasoned vet or new to running a warehouse, follow these tips to optimize your warehouse, grow your profitability, and ensure present and future success. 

Tip 1: Clearly establish your safety protocols

Maintaining OSHA (Occupational Safety and Health Administration) standards in your warehouse should be of utmost importance. Skimp on this step and you could be looking at a life-altering lawsuit (not to mention the bodily harm that could come to you or your employees).

A major component of managing a warehouse is to ensure the safety of your staff. The constant moving of people and products can create the perfect environment for accidents to occur. Therefore, you should make sure aisles and walkways are clean and free of spills and debris at all times.

PROTECT AGAINST SLIPS AND FALLS

Slips and falls are the leading cause of fatalities in construction and are responsible for approximately 40% of fatalities in warehousing. These tragic incidents are entirely preventable. Anti-slip mats for traffic lanes, equipment to reach high shelves, and forklift safety training can help mitigate slips and falls. 

PROVIDE CLEANING TOOLS

As the owner of a company, it’s not exactly your top priority to keep tabs on the cleanliness of your warehouse. Instead, hold supervisors and staff accountable for their work environment. Have brooms, mops, and trash cans readily available and encourage employees to take care of their workstations throughout the day.

INSTALL PROPER LIGHTING

Make sure all areas are lit properly. Low visibility can lead to mishaps during picking and sorting. Bright lights encourage alertness and safety by keeping your employees awake and aware of their surroundings. Lastly, provide large visual cues throughout your warehouse of various safety and overall warehouse guides to create a consensus on how the workplace operates.  

CONDUCT CONSISTENT INSPECTIONS

Conduct visual inspections of your warehouse regularly to ensure that you are always at peak efficiency. Clean, neat, and organized are words that should be synonymous with your storage environment.

The simple solution is to use a daily checklist. There’s a reason airline pilots, brain surgeons, and astronauts all swear by checklists. When humans use checklists, they don’t have to store all these important tasks in their heads.

FOLLOW OSHA GUIDELINES

Every warehousing safety regulation you need can be found in the OSHA Pocket Guide. Warehouse managers will learn the importance of driving forklifts properly and material storage methods, among many other things. 

It’s important to have clear documentation of these protocols and obtain written signatures from your warehouse employees. This is especially critical as your business and personnel count grows.

Tip 2: Clean and audit your warehouse

A cluttered warehouse is a cluttered mind. You know how when your house or apartment is messy, it sort of clouds your judgment and makes it hard to think clearly? Maybe that’s just us neat freaks.

Your warehouse is the epicenter of your business. If products, boxes, and labels are scattered everywhere and disorganized, it’s simply going to be impossible to optimize it. For one, you can’t correctly assess the resources you have on hand, much less utilize them in the most profitable way.

This should be obvious, but your first step is to physically organize your warehouse.

Even if you’re not sure where things need to go, at least pick them up and put them out of the way of primary foot traffic lanes and your processing area. 

Next, conduct an audit of your warehouse. Only then can you see what materials and products you have on hand, what you need more of, and how you can best optimize your storage systems. 

You don’t have to shut down all your operations for a day and get behind on orders to properly audit your warehouse. We’ve written extensively on cycle counting and the benefits it provides to warehouse accountability without halting operations. 

Tip 3: Optimize how you store your items

Matt Grierson is a managing director at Dexion, a company that provides storage solutions across Europe. He says many companies approach him believing they’ve outgrown their warehousing space when they actually haven’t. 

They often have enough space, they’re just using it poorly.

TIPS FOR OPTIMIZING THE PHYSICAL LAYOUT OF YOUR WAREHOUSE

How exactly do you optimize the physical layout of your warehouse? Follow this checklist as a good starting point:

Measure the space you have to work with

This includes not only measuring the physical, top-down dimensions of the room, but also particular dimensions of shelving space, including any vertical storage options. 

Define storage, sorting, shipping, office, and product locations.

One of the biggest benefits of doing an ABC analysis (something we’ve written on at length here), is that it reveals your highest-value items. These are the items that should be placed most directly next to your processing and shipping location. 

Pick the best shelving for your products e.g. two-tier, fixed, mobile, etc.

Don’t settle for traditional shelving systems if that’s not what’s best for your business. For a primer on the most common storage systems and their use-cases, check out this resource.

Create clear labeling for aisles and product locations.

As your warehouse grows, proper aisle labeling is a critical stipulation of OSHA compliance. Your labeling systems don’t need to be complicated. All you need is a simple numeric or alphanumeric system denoting aisles and shelves. Doing so is not only beneficial for safety, but for picking and packing efficiency. 

Establish optimal material flow paths and picking paths.

If your processing station is far away from your label printer, which is likewise on the opposite side of your highest-value products, you’re going to waste time. As we’ve said before, time in the warehouse is measured in seconds, not minutes. 

Any time you can shave off inefficiencies in “motion waste,” you’ll ship products faster and more accurately. These practices predict positive customer experiences, which is really the key to success in any ecommerce business.

Avoid overstocking low-demand products to open up more space.

Warehouse managers have to walk a fine line between not overstocking their shelves and risking dead-stock (product that doesn’t sell), and not understocking their shelves (resulting in stock-outs). 

These obstacles can be overcome with demand forecasts, accurate reorder points, and a clear understanding of the supply chain.

These are features we’ve baked into SkuVault Core, the world’s best WMS (warehouse management system). We’re obviously a bit biased, but check it out and see for yourself. 

Tip 4: Optimize your warehouse receiving process

As a business owner or warehouse manager, your primary goal is to ensure that the right product gets to the right place at the right time.

In a way, you are the gatekeeper between the business and the customer. As the gatekeeper, it’s your job to facilitate this transition and make the process appear as seamless as possible, which, as you may already know, is no easy task.

In order to achieve this, your entire warehouse operation from receiving to picking, to shipping, to data collection needs to be optimized for peak efficiency.  

You should think about the optimization of your warehouse workflow the moment a product arrives in the receiving bay. When that product order arrives, it’s officially a part of your warehouse. 

Once received, products are checked for damages, mis-picks, and quantity. It’s important to give employees plenty of space to remove inventory from pallets and perform other duties.

MANUAL RECEIVING VS. AUTOMATED RECEIVING

In the manual checking process, an employee looks over a shipping invoice and visually checks that everything listed has arrived and has the right quantity. While this method is one of the cheaper options for checking products, it increases the chance of human error dramatically. 

During manual checks, it’s not uncommon for people to look over a certain item or mistake one product for another. In many cases, multiple people are required in order to double-check the shipment. This requires twice the effort and costs your business time and money.

A better way forward is automated receiving with warehouse management software. Automation minimizes the error of manual checking by doing the work for you
(more on automation later in the post).

Instead of visually cross-referencing an invoice with the product, automation methods use scanners to run a comparison by simply scanning product barcodes while unloading them. 

Tip 5: Optimize your warehouse picking and packing process

Picking and packing are two unique, but inextricably woven disciplines. They’re two sides of the same coin, but each deserves its own treatment in this post. Let’s start with picking.

Picking is one of the most pivotal processes in your warehouse. Effective and accurate picking is 75% of a well-run business. When a product is picked incorrectly, you appear less reputable as a company. 

To make matters worse, you’ve just wasted the time and money it took to pick and ship that product and now have to spend more time picking and sending the right product.

To optimize this process and avoid picking mishaps, consider the following tips:

1. Don’t mix multiple SKUs in the same location
2. Place products in optimal locations for pickers
3. Designate zones for certain products e.g. peak season products, on sale items, or hot sellers
4. Pick as many orders as possible in a single run to lower pickers travel time
5. Automate picking process, like alphabetizing the locations of your products
6. Implement incentives for pickers (such as leaderboards or bonuses for fast and error-free picks)

Picking actually has optimization opportunities that many warehouse managers tend to overlook.

Study the habits of your buyers. By doing so you can find new ways to optimize picking. 

For example, if your company sells sports equipment and you have a larger number of retail buyers who purchase from you regularly, consider how you are picking for these customers. Instead of picking the orders as they arise, try picking them all at once. 

(By the way, this is one of the main tenets of wave picking, something we’ve written on here.)

If you have multiple buyers who make the same purchases regularly, go ahead and prep for these orders and sort them according to past purchases.

You can also use picking to learn about your products. By keeping track of how frequently an item is picked you can make in-depth decisions about that product.

For example, say that you stock a product that needs to be picked only once every few weeks. This may lead you to reorder smaller amounts, have less safety stock, or put it in a less accessible area of your warehouse to make room for higher-value SKUs.

Now, let’s talk about packing.

Packing needs to be done quickly with minimal mistakes. An obvious statement, sure, but much easier said than done.

Packaging hundreds of orders a day can be unsustainable without structured methods. Start by establishing a packing location that is near the shipping location.

Even the way you package products contributes to the overall efficiency of your warehouse. Designate only two or three standard shipping packages. Thus, pickers are able to assemble orders at a faster rate and are less paralyzed by option anxiety.

This approach also optimizes freight expenses and makes it easier to support a pick-path methodology.

Shipping software also increases the efficiency of the packing process. Shipping software can create product labels and calculate the weight of the package. 

They also often integrate with warehouse management systems to make the process more seamless. However, these features are just the tip of the iceberg. Learn more about the impact shipping software can have on your business here.

Tip 6: Diversify your shipping solutions

Diversified shipping options give your customers more orders delivered on time. If you are currently only using one shipping solution, do your research and see what other shipping providers are available to you.

Shipping providers like FedEx, UPS, USPS, and freight on board (FOB) are some of the most popular methods to choose from. Understand that the more shipping providers you have, the more options you have if trouble arises.

For example, imagine that it’s a holiday season and you have late orders that need to be delivered as fast as possible. If you only use one shipping provider and they’re not able to deliver the product, you’re out of a sale. 

However, with multiple shipping providers your chances of making the delivery increases.

Increasing shipping efficiencies can also open doors for your business. For instance, say you want to gain access to Amazon’s massive customer base by using Amazon Prime.

Most sellers can only become Prime members through Fulfillment by Amazon (FBA), which ensures two-day shipping.

This could open up entire market segments that were previously unavailable due to their physical distance from your warehouse. 

There’s also Merchant Fulfilled Prime. This method allows merchants who meet certain shipping standards to fulfill shipping themselves, ultimately saving the merchants the overhead cost associated with FBA.

But the main requirement is that you must consistently ship quickly and efficiently. To be competitive, faster is always better.

Keep a list of multiple shipping methods and stay up-to-date on changes in the shipping industry. Also, remember to track orders to ensure delivery in a way that works with your business model.  

Tip 7: Optimize your warehouse data collection

The purpose of data collection is to allow warehouse managers to see what they are doing well and what areas still need improvement. This information will give users an aggregate breakdown of everything in the warehouse. Having real actionable data grants managers the ability to make informed decisions about their products and processes. Which, when used correctly, can clearly point out any fallacies in the warehouse that need to be optimized.

If you see people doing a ton of writing and typing on keyboards as a means to collect data, you have a problem. With near-endless methods for data collection, you should not be relying on manual collection methods. These methods introduce so much human error, often skewing data to the point that it becomes useless.

Instead, use mobile computers with barcode scanners to collect data as a more reliable solution. Implementing a barcode scanning system in your warehouse is a really good (and cheap) idea. We’ve written all about it here.

Most barcode scanners can be connected to your WMS. There, they’ll collect important data about every process in the warehouse. This data includes, but is not limited to:

• Purchase orders
• Replenishment needs
• Product locations
• Picking orders
• Purchase history
• Product receiving

Why Now is More Important Than Ever to Optimize Your Warehouse

According to a recent study, the warehousing sector is well-positioned for the current disruption due to the Coronavirus. The short term will no doubt be tough, but proper planning can make the long term look much brighter.

For those who are new to running a warehouse, the foundation you build determines how well your operation will run in the future. By thinking about optimization from the beginning you not only set high-efficiency standards but also create room to adapt and modify your operations as needed.

In contrast, if you are already running a fully operational warehouse, it’s likely there is still room for improvement. Sometimes refining the things you are doing well and optimizing the areas that need improvement is all it takes to boost your performance and capabilities.

Besides creating a more effective workflow, optimizing your warehouse has significant financial benefits. Every year businesses lose substantial amounts of money because of mis-ships, out- of-stocks, returns, and human error, which can all be traced back to inefficient practices. All of these mishaps can be avoided by optimizing your warehouse workflow.

In fact, The National Retail Federation projected online and other non-store sales to increase between 10 and 12 percent in 2018.

With this statistic in mind, it’s imperative you minimize mistakes while you still can and optimize your warehouse. There has never been a better time to step up your game and capitalize on consumer spending and the rising use of ecommerce. 

Warehouse organization

The first rule for optimizing your warehouse is to get organized. Without a well-planned method for organization, warehouse managers quickly find themselves in over their heads. Floor plans and employee safety need to be optimized before all else.

Begin by mapping out the layout of your warehouse. Use your space’s full capacity to optimize the layout. Appropriate use of warehouse space allows your staff to get jobs done faster and complete more jobs in a day. Not only do you allow employees to work smarter, but you also save on overhead cost by not expanding unnecessarily.

In fact, Matt Grierson, a managing director at Dexion, which provides storage solutions across Europe says only a small fraction of the companies that approach him believe they need to move into larger locations really do need to. They often have enough space, they’re just using it poorly.

Top warehouse safety practices

A major component to managing a warehouse is to ensure the safety of your staff. The constant moving of people and products can create the perfect environment for accidents to occur. Therefore, you should make sure aisles and walkways are clean and free of spills and debris at all times.

Provide cleaning tools

As the owner of a company, it’s not exactly your top priority to keep tabs on the cleanliness of your warehouse. Instead, hold supervisors and staff accountable for their work environment. Have brooms, mops, and trash cans readily available and encourage employees to take care of their workstations throughout the day.

Install proper lighting

Make sure all areas are lit properly. Low visibility can lead to mishaps during picking and sorting. Bright lights encourage alertness and safety by keeping your employees awake and aware of their surroundings. Lastly, provide large visual cues throughout your warehouse of various safety and overall warehouse guides to create a consensus on how the workplace operates.

Consistent Inspections

Conduct visual inspections of your warehouse regularly to ensure that you are always at peak efficiency. Clean, neat, and organized are words that should be synonymous with your warehouse.

Warehouse optimization FAQs

Q. What is warehouse optimization?

Warehouse optimization refers to the process of refining and enhancing warehouse operations to achieve maximum efficiency and effectiveness in terms of storage, layout, and inventory management.

Q. What is warehouse automation?

Warehouse automation involves using technology, equipment, and software to perform and manage warehouse tasks with minimal human intervention, increasing speed and accuracy.

Q. What are some best practices for warehouse space utilization?

Best practices for warehouse space utilization (or warehouse space optimization) include using vertical space, implementing adjustable racking systems, regularly reviewing storage needs, and employing layout designs that minimize travel time for picking.

Q. How do you optimize warehouse storage?

To optimize warehouse storage, you should categorize inventory based on turnover rate, utilize efficient shelving and racking systems, employ warehouse management systems (WMS), and continuously review and adjust storage strategies based on demand patterns.

Q. What are the objectives of warehouse optimization?

The objectives of warehouse optimization are to streamline operations, maximize storage space, enhance inventory management, reduce costs, improve labor efficiency, and ultimately, increase customer satisfaction.

Q. How do you optimize labor efficiency in a warehouse?

To optimize labor efficiency in a warehouse, prioritize employee training, implement efficient picking strategies, utilize warehouse management software, adopt ergonomic equipment, and ensure proper staffing levels based on workflow demands.

Final thoughts

There are plenty of articles and studies written on how 2020’s COVID-19 curveball severely disrupted the warehousing industry at large.

While normalcy seems like it’s almost within reach, these past three years have been a valuable lesson for warehouse managers. There’s never been a better time to “pandemic-proof” our businesses. 

Granted, there are things we simply cannot control. 2020 has surely taught us that. But of the things we can control, there are plenty of things we can optimize to mitigate high-magnitude disruptions. 

For those who are new to running a warehouse, the foundation you build determines how well your operation will run in the future. By thinking about optimization from the beginning, you not only set high-efficiency standards but also create room to adapt and modify your operations as needed.

In contrast, if you are already running a fully operational warehouse, there is likely still room for improvement. Sometimes refining the things you are doing well and optimizing the areas that need improvement is all it takes to move the needle in your business.

Besides creating a more effective workflow, optimizing your warehouse has significant financial benefits. Every year businesses lose substantial amounts of money because of mis-ships, stock-outs, returns, and human error. 

We can trace all these examples back to inefficient practices — things within our control.

With this in mind, we’d love to show you how SkuVault Core can increase business profits and optimize your warehouse’s efficiency by helping you implement the tips described in this post. Reach out to our team for a live demo today.