4 Biggest Cash-Sinks When Operating a Warehouse

4 Biggest Cash-Sinks When Operating a Warehouse
  • Opening Intro -

    As the logistics center of your business, it's critical that your warehouse provides maximum value in your cash flow.

    That means developing cost-efficient strategies and reducing expenses wherever possible.

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Regular assessments should be made to reduce waste and identify needed improvements.

Here are four of the biggest costs in maintaining your warehouse operations.

1. Labor

Labor is one of the largest expenses in many aspects of business operations, but also one of the most controllable. To keep workforce costs down it’s necessary to train and motivate employees to deliver a high and consistent level of performance. This starts with careful screening and interview practices for core competency and good character.

Workers need to be trained in efficient handling procedures that promote safety yet reduce movement of people and goods. But for long-term employee retention, you must provide competitive wages, benefits, and opportunity. The cost to train a new employee can end up over $1000, so frequent employee turn-over can become a major problem for your business finances.

2. Outbound Freight

Shipping costs will be one of your highest costs. This is a key business concern that needs constant monitoring and evaluation for optimal benefit. Cost analysis can help you discover the best vendors in terms of shipping costs by weight or volume, delivery time, damaged merchandise, and accuracy.

If you rely on your own fleet, you should monitor fuel use, maintenance costs, insurance, arrange the most efficient routes, and hold your drivers accountable in order to improve performance and reduce expenses. You should check whether it will be more expensive in your particular locale to hire your own drivers or use a third-party shipping company.

3. Inefficiency

It’s critical to cost reduction that you find ways to use what you have to maximum efficiency. Through poorly planned layouts, processes, inventory control, and storage utilization, you’re introducing waste and adding cost.

Streamlining operations in modern warehouses also requires integrating automation technologies and tools such as barcode systems, RFID tags and scanners, inventory control, and data collection for operational analysis. You can find Enterprise Resource Planning (ERP) software to help you identify inefficiencies and automate some of your business processes.

4. Climate Control

One huge overhead for many companies is the need to maintain cold and subfreezing temperatures for perishable or frozen goods. This must comply with FDA regulations. In a large and busy warehouse environment, this can represent a huge power consumption. For such companies, it’s important to invest in sophisticated new cooling systems with equipment from MTA Australasia or similar providers that operate efficiently, reliably, and ensure stable temperature control.

Failure to implement a controlled system can result in product loss as well as soaring power bills or fines.
Keeping down warehouse costs requires careful planning from the outset and constant improvements to operations, equipment, and personnel. Minimizing warehouse costs is critical to boosting profitability for inventory-based companies.

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