Warehouse Optimization: 15 Expert Tips For Upgrading Your Operations
Time & Money Sink: An unoptimized warehouse can significantly drain financial resources and time, leading to inefficient operations and poor customer satisfaction.
Customer Unhappiness Guaranteed: A poorly managed warehouse almost always results in a bad buying experience for customers, impacting your business reputation and customer loyalty.
Efficiency Lost: Without optimization, warehouses miss out on streamlined processes and operational efficiency, hindering overall productivity and profitability.
An unoptimized warehouse is a great way to waste time and money while giving customers a terrible buyer experience.
Yet, a whopping 62% of warehouses in the US have reported human error as the cause of their fulfillment problems. Apparently, warehouse optimization isn’t a priority for most brands.
Luckily, this is good news for those interested in making their warehouse operations the best they can be (that’s you!). All those unsatisfied former customers from the less savvy brands are ready for taking.
In this guide, we will look at 15 tips you can use to optimize your warehouse today, so let’s dive in.
What is Warehouse Optimization?
Warehouse optimization is the strategic process of improving warehouse operations to maximize efficiency, reduce costs, and enhance inventory management.
This process includes various tactics, including:
- Streamlining processes. Refining operational procedures to facilitate smoother workflows.
- Maximizing space utilization. Efficiently using available space to ensure optimal storage and accessibility.
- Upgrading technology. Implementing advanced technology solutions to improve inventory management, data tracking, and communication.
- Optimizing staffing. Adjusting staff levels and roles based on demand and workflow to maintain high productivity without overstaffing.
- Investing in machinery. Introducing new or upgrading existing machinery to speed up operations and reduce manual labor.
The ultimate goal of warehouse optimization is to increase productivity, reduce costs and waste, improve staff safety and happiness, and, most importantly, provide a world-class customer experience.
Benefits of an optimized warehouse
Many ecommerce business owners think that warehouse optimization is just about saving money.
But your warehouse processes don't just save you cash, they also improve the wider business and give customers a better experience.
Here are some of the standout benefits:
- Increased operational efficiency. Inefficiency and bottlenecks in a warehouse can cost time and money. By improving operations, your staff can pick and pack more orders.
- Reduced operating costs. Improving efficiency will reduce waste and costs and improve profitability.
- Enhanced customer satisfaction. Optimizing isn’t just about saving money! A better warehouse process can give the customers a better experience too.
- Improved inventory accuracy. A good level of inventory accuracy is 97% accurate, yet most businesses don’t reach this level. Inaccurate inventory can lead to customers being disappointed.
- Faster order processing. Faster order processing means more orders can be processed each day. This is particularly important if you have a just-in-time shipping management system.
- Better space utilization. Wasted space is a waste of space. Organizing your warehouse with fast-moving products near the picking station, storage near the back, and will increase picking speed.
- Reduced error rates. Errors lead to returns, and a badly organized warehouse increases the chances of mistakes.
- Enhanced employee productivity. Happy staff are generally 13% more productive, which is huge! Imagine each staff member picking 13% more items a day and what that will do to your bottom line.
- Greater scalability. The more productive your staff, the faster you can scale without increasing costs.
- Improved safety standards. 18% of warehouse incidents in the UK were caused by bad training for lifting and carrying. This could be an easy area to improve, and safe staff are much happier.
- Enhanced sustainability practices. Warehouses account for around 11% of logistics emissions. Sustainable packaging is one part of a warehouse that can be improved, but also consider the warehouse emissions and energy use.
15 Warehouse Optimization Tips For Streamlining Your Ops
Now that you’re convinced that optimization is for you, let’s get into some optimization ideas for creating a more efficient warehouse operation.
1. Uncover hidden warehouse potential
Unless you move your warehouse, you will always be restricted by the space you currently have.
However, you can use your space to your advantage by optimizing the space you have so it has more storage, a more efficient workflow for staff or more space for equipment and technology to move.
Here are some tips for uncovering warehouse potential:
- Start by looking at your current warehouse layout plan. Consider if you have the most important products stored near the picking station, or if your storage area is stacked as effectively as possible.
- Measure your current storage space. Remember to also measure the space vertically, so you can improve shelving.
- Define your product types using ABC product types. Use this information to decide where products should be stored.
- Decide on storage types. Shelving comes in lots of different styles, such as tiered, mobile, and adjustable. There are also storage bins, pallet racks and other types of storage.
2. Craft a winning warehouse strategy
Crafting a winning warehouse strategy involves a wider approach to optimizing efficiency and operations.
Start with looking at your current processes to identify pain points and areas for improvement, then make a plan for improving those processes. Consider what an ideal warehouse would look like for you.
The key areas to focus on are:
- Picking and packing time. Designing an optimal warehouse layout that creates a smooth flow of goods and minimizes material handling times.
- Poor or inaccurate reporting. Implement a warehouse management system to streamline operations and improve reporting.
- Picking errors. Adopt technologies such as automation and real-time data analytics
- Safety problems. Build your warehouse strategy around the safety of the staff.
- Categorizing inventory. Use ABC analysis to identify your most important items, and prioritize these items.
- Reduce shipping errors. Ensure you understand why shipping errors are happening and how you can improve them. This usually involves improving technology such as picking and packing software or devices.
3. Optimize inventory control for savings
Inventory management can be a very difficult task, especially when your business is growing.
In my business, I have stock kept in 3PL warehouse, in-house warehouse, in distribution centers, in Amazon FBA USA, Amazon FBA UK and Europe, and in transit and in manufacturing.
This is a lot of moving parts to look after, and without a great inventory management system (IMS), I would be lost.
I also sell this stock through my own website, Amazon, Walmart, Etsy, and wholesale. I need the inventory to be kept up to date in real-time, otherwise I’ll have disappointed customers.
The best inventory management systems and warehouse management systems have real-time reporting to keep track of your inventory.
This means the customer support team, warehouse team, customers, and business can all have a view of where stock is, what requires replenishing, and what’s selling slowly.
The benefit for your warehouse team is you can avoid stockouts and optimize storage capacity.
The benefit for the business team is you can improve your forecasting and understand what products your customers want from your business.
4. Choose the right WMS for peak efficiency
There are a number of warehouse management tools (WMS) that are suitable for larger or smaller operations.
The main features of warehouse management software are:
- Order fulfillment: Handling pick lists, distributors, shipping, sales channels, and purchase orders.
- Inventory management: Real-time tracking of inventory levels, locations, and statuses via RFID, barcodes, or QR codes.
- Receiving and putaway: Efficient processing of incoming goods, including inspection, labeling, and storage.
- Picking and packing: Optimizing picking process, routes, and methods, with potential integration with automated systems.
- Shipping and transportation management: Coordinating shipping processes and integrating with carriers for real-time rates and tracking.
- Labor management: Monitoring staff performance, labor costs, and optimizing workforce allocation.
- Reporting and analytics: Providing insights on inventory, order fulfillment, and productivity for strategic decisions. Pick the best KPIs for your business.
- Integration capabilities: Ensuring data consistency and operational efficiency by integrating with ERP, CRM, and ecommerce systems.
- Quality management: Managing quality control checks and efficiently processing returns.
- Workflow management: Automating warehousing processes like putaway, slotting, or cycle counting.
- Yard and dock management: Optimizing vehicle and goods movement at warehouse yards and docks.
- Security and compliance: Maintaining data security and adherence to regulatory standards.
- Mobile accessibility: Offering mobile options for on-the-floor access and task management.
We’ve put together our top 25 picks for the best WMS, but here’s a peek at the top ten and what they’re best for:
5. Leverage warehouse automation & new tech for ROI boost
Most warehouse management systems have automation built in, such as automatic shipping label printing, inventory level updating on incoming shipments, and picking instructions.
Technology is changing quite quickly in warehouses, and there are now automation that integrate robotic picking tools which can improve ‘dock-to-stock’ time, staff floor distance traveled, inventory accuracy, and order picking accuracy.
On a more basic level, automation can keep all the systems updated.
For example, low stock updates in the warehouse can be automatically forwarded to the order management system (OMS) and IMS so that the business team and customers can see stock levels in real time.
6. Build a robust shipping network
Even big ecommerce brands use shipping partners, such as FedEx or UPS, to manage their logistics.
Unless your business has the capacity to handle a shipping team, it’s by far the most cost-effective option.
However, you don’t need to use the same shipping company you’ve always used.
The Ecomm Manager has a full review of some of the best shipping companies you can use, including ShipStation and ShipBob, but there are many to choose from.
Some of the main benefits of using a great shipping company include better delivery rates, faster shipping speeds with a distributed warehouse, and the widest amount of integrations.
Some companies offer different shipping options, such as next day delivery or free shipping.
7. Expedite receiving for smooth operations
Smaller warehouses often manually check each product into the warehouse, before sorting them into the right shelves.
The reason for this is it is cheaper at first, and you can start right away without waiting for technology.
Checking items in manually is very time-consuming and there is a high chance of human error.
Automated receiving involves using a scanner to scan each carton in before it is placed on the shelves. It is a much quicker process, and it isn’t as expensive as you might think.
The issue with automated scanning is there are fewer checks on issues such as breakages and incorrectly labeled products.
However, these issues can typically be picked up with spot-checking and by having good reporting systems.
8. Perfect your picking and packing strategy
Picking and packing is one of the main areas where your warehouse workflow can be optimized.
In fact, 17% of lost customers are due to incorrectly packed products!
In small warehouses, picking is often done by hand. An order comes in, and the warehouse worker finds the stock, picks the order, and takes it to the packing area.
This can be time-consuming as the warehouse grows as the staff member needs to take time finding the inventory, checking it is correct, and then packing it himself.
Your warehouse layout will have a big impact on picking time, but some other factors include:
- Keeping similar SKUs in the same location
- Keeping products easy to access
- Using zone picking for fast-moving items
- Zonal staff members to reduce travel time
- Batch picking based on shipping timetables
- Automated picking using RFID technology
- Improved machinery for faster picking times
Packing has similar impacts on the shipping process.
The main aim of packing is speed and accuracy, but packing is the last time one of your staff will touch the item before the customer receives it.
This means they need to do final checks on a product and include any marketing materials or other branded packaging.
This can all be time-consuming.
But, there are some things that you can do to improve the process, such as:
- Automatically printing packing labels
- Using technology, such as automated packing lists, to help packers avoid mistakes
- Integrating your WMS with shipping companies to automatically print shipping labels
9. Cultivate a safe warehouse environment
As an ecommerce manager, you are responsible for the safety of your staff. Nobody wants to go to work and get injured!
In the US, there’s a board called OSHA (Occupational Safety and Health Administration) who maintains standards for safety in the workplace.
They have the training you can follow as a manager and set the standards you need to follow in the warehouse.
A safe warehouse is good for the staff, but some regulations will also help optimize the warehouse, such as cleaning aisles for a quicker picking journey.
These are some main things to implement today:
- Clear aisles to protect from tripping. Keep aisles clear, and clean up any spillages immediately. If you have a particularly dangerous area, such as a frozen section, you can build an anti-slip mat into the floor.
- Training for picking and machinery. Training is important for reaching products from shelves, especially if they are heavy, bulky, or irregularly shaped. Equipment such as forklifts need specialized training too.
- Lighting. Install proper lighting so that staff can always see where they are going. This is not only safe but will also reduce picking errors. Clearly light up exits, too, so staff know where to go when working at nighttime. Glow-in-the-dark floor directions can also be a big help in warehouses that work through the night.
- Safety equipment. Provide appropriate safety equipment such as high-vis vests, hard hats, and steel boots.
- In-house or third-party inspections. You can conduct inspections yourself, or you can have a staff member responsible for safety inspections. There are third-party companies that can help to maintain health and safety standards and provide you with a list of improvements you can make.
- Cleanliness. Provide cleaning tools for the staff to keep their areas clean, and hold staff accountable for their particular areas. Cleaners will be able to clean the warehouse generally, but your staff need to be responsible for keeping their areas tidy.
10. Streamline your supply chain with audits
Accurate inventory counts are vital for understanding the finances of the business, and to ensure the customers aren’t disappointed with an incorrect stock count.
Regular audits can be done manually by doing inventory counts, but they are quite time-consuming.
The process can be sped up by using RFID tagging and handheld scanners, which can help with accurate stock counts. However, this is a more expensive solution, so it only makes sense for warehouses with larger amounts of inventory
ABC analysis can reduce the frequency of stock counts, or at least speed up the process, by keeping fast-moving stock together.
The most important inventory is kept in the same storage area, so the stock counts can focus on the most important inventory, rather than counting everything at the same time.
The aim of audits is to find problems with the warehouse and supply chain.
For example, you could find theft and damage is being caused by staff, or you might find there are system errors that need to be fixed either with a new process or an improvement to the WMS.
11. Prevent stockouts & excess inventory
Inventory management is the most critical job for a warehouse, and keeping the right level of stock at all times will keep customers happy and sales flowing.
The key to keeping the right level of inventory is in your reporting metrics and integrations.
The WMS needs to effectively integrate with the other parts of your system, otherwise you will lose sales.
Many WMS will also give amazing reports on current inventory, and also provide forecasts for your products.
These forecasts take into account past sales, upcoming busy periods and how many returns you can expect to receive.
The key data points I track to avoid stockouts are:
- Inventory turnover. What is the sales velocity for your products?
- Stockouts. Are products currently out of stock?
- Overstock. Are you storing too much of a particular item?
- Receiving and shipping efficiency. How quickly can inventory be restocked?
- Order lead time. How long does it take to restock your products?
A WMS like Shipbob will provide all this data in an easy-to-read dashboard.
12. Improve the returns process
Customers will inevitably return products. It’s a normal part of the ecommerce game.
Understanding why products are being returned is a big part of your reporting, and for the warehouse the most important factors are:
- Creating a returns process that minimizes incorrect returns. Make the returns process easy for the customer to follow, reduces customer error when returning items. It also improves conversion rates, as 60% of customers look at a returns policy before making a purchase.
- Improving customer retention. You need to make it easy for customers to return products, as they are more likely to purchase if they trust the returns process.
- Reducing waste by increasing sellable returns. Ensure products can be resold with safely received returns.
- Quickly replacing items for customers. Some customers just want a different size or color. You want to ensure these customers get their replacement as quickly as possible.
- Data reporting. Use reporting to understand product trends and return reasons to get a good insight into your customers’ buying habits.
13. Empower workforce through training
Training is important in a warehouse because technology and techniques are improving very quickly. Plus, a trained employee is so much more efficient than an untrained one.
Staff need to understand their roles and responsibilities fully to succeed, and building training into staff work time will help to identify where staff are excelling, falling behind, or need further training in order to succeed.
There are warehouse courses, certifications, and diplomas staff can take to succeed, which will help their career and boost your business.
14. Embrace Lean for maximum value
Lean management is about doing more with less.
Sometimes teams want a quick solution such as a new staff member, but oftentimes it is better in the long run to help teams become more productive.
One easy example of Lean management could be using zonal or batch picking to reduce the picking time, or to improve the workflow, so a team member can reduce their number of steps.
It could also include empowering your team members to suggest improvements for the warehouse.
This is often a good idea as it gives the teams buy-in to any new ideas, plus you get their expertise into how a good warehouse should be run.
15. Go green in your warehouse
Over 140 million tons of plastic packaging are used annually, and nearly a third of this is from additional packaging items such as unrecycleable bubble wrap and foam packaging beans.
90% of this plastic is never recycled, which causes a huge environmental impact.
Not only is this bad for the environment, but 87% of customers say they are more likely to buy from a company that reduces plastic use.
As well as reducing packaging, you can improve the impact of the warehouse itself, by managing the environment within the building.
Toyota is a great example of this, as they have highly integrated and automated warehouses and production lines.
They focus on reducing use of heating and cooling where possible, lighting using LEDs to keep energy and costs down, using automation where possible, and improving the warehouse layout to reduce journey time.
Lower your Costs and Delight Customers With an Optimized Warehouse
An optimized warehouse will save you money, improve your efficiency and keep your customers happy.
The most important step is to ensure you’re using the right warehouse management system software and have the best integrations set up to your other systems.
Once you have the system set up, you can look at optimizing the space utilization and the flow of staff around the warehouse to reduce picking and packing time, and lower the risk of human error.
Optimizing a warehouse isn’t an overnight job, and it will need continuous improvement, but without making the changes you will fall behind your competitors.
For more information about warehouse management software, check out this guide with some of my favorite software, and the pros and cons of each.
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Warehouse Optimization FAQs
Let’s knock out a few more questions before we wrap up this topic for the day.
How can technology improve warehouse operations?
Technology such as warehouse management systems, automation, and robotics can improve warehouse operations by reducing human error, improving data reporting, and increasing the picking and packing speed of the warehouse team.
By reducing the manual work a staff member needs to do, they can focus on improving the overall warehouse performance.
What role does employee training play in warehouse optimization?
Warehouse staff are ambitious and serious about their careers. Plus, they want to work in a warehouse that is safe and efficient.
By implementing training into the monthly routines of the staff, you can improve the quality of the work, increase warehouse productivity, reduce accidents, and build a team that loves working for you.
How do you optimize receiving in a warehouse?
A separate entrance and exit for trucking will reduce congestion, especially if you can organize delivery slots with the shipper.
A clear space for the reception area of the warehouse is also important, so the inventory can be scanned in, sorted, and stored. You need enough space for the forklift trucks and a clear path for them to follow.
How do you manage warehouse utilization?
The first step is to make a clear floor plan of your current space, both on the floor and the vertical space.
Once you have this plan, you can calculate what percentage of the space you are using and how effectively you are using the space.