If you’re a business owner operating in the retail, wholesale, manufacturing, transport or logistics industries, you know how important warehousing is for the supply chain management process.
While it can be a complex and expensive process, innovating, implementing new technologies and optimising your current space can help reduce costs and optimise the entire process. On the other hand, if you’ve reached capacity and want to grow, expansion is the key.
Warehousing can often be overlooked as a stagnant part of your business’s operations. The misuse of warehouse space can negatively impact the entire supply chain, right up to the end user, which can reflect poorly on your business.
Important Warehousing Factors to Consider When Expanding Your Business
When considering your supply chain, it’s a good idea to investigate different warehousing options and any variables that might impact your business’s supply chain cost.
With different types of warehouses, such as private, public, bonded and contract warehousing, you have the choice to select the type that suits your business’s needs. A few important factors to consider are:
Location
Being close to key suppliers or customers helps streamline the distribution process to support quicker order fulfillment. It can also reduce transportation cost, and shorten delivery times. Having a warehouse closer to main highways, ports or airports is also critical for seamless operations.
Warehouse technology
Implementing a warehouse management system can help your business manage inventory accurately and minimise errors, which can help you save in the long term. Technology also supports growth, which can allow you to handle more stock without having to expand or hire additional staff.
Cost per SKU
A stock-keeping unit (SKU) allows you to track inventory. It consists of alphanumeric digits and a scannable bar code printed on a product label. The characters define a code that tracks the price, product details, manufacturer and point of sale. Implementing SKUs can help you control business expenses and keep your inventory organised and accurate. Calculating the cost per unit is essential for managing and optimising SKUs as it gives you an understanding of the financial performance of individual products.
Additional features
Specialised features, like climate control or packaging services can give you the option of developing other products that meet clients’ needs, creating additional revenue streams. This may justify the need to expand.
These four proponents impact both the efficiency and cost of warehouses. Carefully considering each one of them will help you make the best choice when looking at expansion or maximising the use of the space that you currently have.
Here is a list of six warehousing strategies you can apply when you’re ready to expand:
1. Consider leasing options to expand warehouse capacity
When considering leasing options to expand warehouse capacity, it’s important to evaluate the location, and ensure that it’s within close proximity to customers and transportation hubs.
Carefully consider lease terms, whether it accommodates expansion, rental and maintenance fees and any hidden expenses. To improve your chances of lowering business costs, negotiate favourable lease terms with the landlord or letting agent.
2. Make better use of your current warehouse space
When considering expanding your business’s warehousing it’s important to determine whether you’re making efficient use of your current warehousing space.
The best use of space can help you plan better by keeping inventory well organised and easy to manage.
It can also improve operations, help you forecast inventory needs and avoid shortages, which helps control costs. When a shipment of products is expected, staff need to plan for where the products are going to be stored to make the most efficient use of the space.
Underutilised warehouse space is usually the result of a poorly configured set-up. Here are two ways to optimise the use of your existing warehouse space and get the most out of it:
- Get creative with vertical space: You can optimise your existing warehousing space by installing high-density racks, mezzanine floors, or vertical lift modules to maximise storage.
- Adopt cross-docking: With cross-docking, goods are immediately loaded onto outbound vehicles for fulfillment. Employing this strategy will reduce the amount of inventory you’ll need to assign to storage. You can then make the most of available space to store inventory that needs to be stored for longer periods.
3. Optimise inventory placement and flow
To make the most of inventory placement and flow, you can start by assessing your current storage needs based on what you’re storing and how often it moves.
Grouping items by type helps make things easier to find and reduces extra movement. You can use FIFO (First In, First Out), an inventory management method where the oldest items are used or sold first, to avoid excess stock piling up and going to waste.
You can also create specific zones for the most frequently picked items to speed up the process. By streamlining your inventory placement and flow, you can boost efficiency, cut down on handling time and reduce errors.
4. Automate processes to boost warehouse efficiency
Warehouse optimisation software includes advanced tools aimed at making warehouse operations more efficient. It uses artificial intelligence (AI) and machine learning (ML) to boost efficiency in managing inventory, fulfilling orders, and predicting demand.
Software like a warehouse management system (WMS) analyses both past and current data to help you manage resources better to ensure that everything runs smoothly in your warehouse.
AS/RS (Automated Storage and Retrieval Systems) and VLMs (Vertical Lift Modules) are technologies designed to streamline warehouse operations by automating the storage and retrieval of goods.
5. Apply lean warehousing practices
Lean warehousing is the basic premise of having just enough to get the job done. Inventories should arrive exactly before they need to be transported out and in sufficient numbers to cover any losses due to damage in transportation.
Lean warehousing is the process of minimising handling and constantly being on the lookout for methods to increase efficiency at every stage of the process.
The 5S organisation concept, which can be applied to any facility, is a good place to start when applying the lean principles in the warehouse. Here’s what they stand for:
Sort: Identify and remove unnecessary items. Focus on keeping only what is essential for daily operations to reduce clutter and improve workflow.
Streamline: Arrange items in an orderly manner, making them easy to access. Designate specific locations for tools, equipment and materials to minimise time spent searching.
Shine: Keep your warehouse clean. Make a habit of regularly cleaning equipment and work areas to ensure a safe and efficient environment.
Standardise: Establish consistent procedures and standards for maintaining the first three 3’s. You can do this by creating guidelines, visual controls and routines to ensure uniformity and sustainability.
Sustain: Foster a culture of discipline and commitment to these five principles and train your team to uphold them.
6. Consider your budget and the return on investment
Determine whether the additional expense will generate enough revenue or efficiency gains to justify the investment. Assess the ROI and budget for ongoing operational expenses to determine if expanding is a worthwhile investment.
If you don’t have the capital on hand to invest in expansion, a capital advance can provide quick access to fixed-term business funding for upfront investments, while a revolving capital facility offers you the flexibility to manage ongoing expenses like a lease payment or operational costs.
Lula’s flexible funding solutions give you that capital injection to boost your business’s growth. Now you can think about expansion, without worrying about the cash flow. Apply online in minutes to see if you qualify for up to R5 million in funding.
