How to Improve Warehouse and Distribution Center Efficiency

5 Tips for Maximizing Warehouse Efficiency

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It’s never been more crucial for warehouses to become more efficient. Supply chain demands are rising, yet adding warehouse space is often expensive, slow or impractical. Facilities must make the most of what’s available to them, so better warehouse organization is imperative.

Today’s consumers demand speed. On average, online shoppers expect to receive an order within eight days, and 92% say shipping speed is important to their purchase decisions. Warehouses must become more efficient to keep up with these expectations and satisfy consumers growing increasingly accustomed to agility.

Warehouse organization is perhaps the most crucial consideration in improving efficiency. With that in mind, here are five tips for organizing your warehouse to enable higher productivity.

1. Audit Your Current Floor Plan

The first step to optimized warehouse organization is finding out where current inefficiencies lie. Facilities can’t expect to create an improved floor plan if they don’t understand where and why their current one falls short. Whether warehouses perform their own analyses or hire a third-party auditor, they must learn their weaknesses before implementing any changes.

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Since warehouses are complex, interconnected operations, this analysis should consider several data points. First, categorize each area by its purpose, then start tracking foot and forklift traffic throughout the warehouse. This data will reveal the route employees take for any given process, showing where they’re most needed and where the most delays occur.

If employees frequently walk through multiple sections before picking an item, the floor plan may be overly complicated or inefficiently labeled. If congestion often occurs in one area, different workflows may be colliding, or it could be a high-demand zone with insufficient space. Highlighting these issues provides a roadmap for organizational improvements.

2. Organize According to Demand

One of the most common sources of warehouse inefficiencies is a failure to consider the Pareto Principle. This concept holds that 80% of consequences come from 20% of causes. In warehousing, this manifests in the fact that 80% of activity comes from 20% of the items in many facilities.

To account for this imbalance, warehouse managers should reorganize their floor plan according to demand. The 20% of items that see this highest demand should be the most easily accessible, requiring the least travel and picking time. The next-most-accessible area should be for roughly 30% of the total inventory that sees moderate picking rates, then the last 50% behind that.

Keep in mind that these categories can, and likely will, shift over time. Warehouses should keep a careful eye on consumer trends, and when they notice changes in demand, adjust their layout accordingly. Whenever these changes occur, all employees should know beforehand, so the changes don’t disrupt their routine.

3. Establish a Clear Labeling System

Labeling is an often overlooked part of warehouse organization. No matter how well-ordered a warehouse is, it won’t significantly improve efficiency if employees don’t understand it. An easily understandable labeling system helps workers find what they need faster, reducing picking time. The most effective systems utilize several labeling methods to achieve this.

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First, use brightly colored, easy-to-read magnetic labels for shelves. There are options available today as large as 4 inches by 10 inches, helping workers spot and read them faster. Using magnetic options also makes it easier to change labels when reorganizing inventory due to changing seasonal demand.

Next, warehouses should implement a technological approach to guide workers to these specific shelves. Pick-to-light systems are helpful, but RFID tags typically provide the best results. Studies show that organizations using RFID tags attain 99.9% order accuracy or higher. Combining these technological solutions with traditional labeling offers the most assurance that workers can find what they need.

4. Maximize Available Space

Warehouses frequently have unused, or rather, unoptimized space available. In most companies, 20 to 30% of inventory is dead or obsolete, taking valuable space that could go to in-demand items. Tracking what products are moving and which aren’t can help reveal this waste, which warehouses can then remove.

After removing superfluous items, maximize available warehouse space by reorganizing aisles. One of the most straightforward ways to increase capacity is to take advantage of vertical space. Stack racks higher or add a row of mezzanine storage to capitalize on this space. Remember to stay within rack manufacturer specifications for height and weight, though.

Another way to maximize storage space is to make aisles narrower. Measure all equipment to learn how wide spaces have to be to allow forklifts to pass safely, then work off of that number. Narrowing aisles throughout the entire warehouse can create enough space for one or two new shelves.

5. Embrace Continuous Improvement

Optimal warehouse organization is not a one-time improvement. Trends and demands change over time, and warehouses will have to adapt with them to maintain high levels of efficiency. To that end, facilities should implement a system of continuous data tracking and review to enable ongoing improvements.

After implementing any changes, keep tracking the same metrics as the first audit. Expect a few initial disruptions, but if traffic flow, picking rates or other metrics don’t improve after some time, consider making additional changes. If a reorganization does produce positive results, similar strategies may be effective elsewhere within the warehouse, too.

Continuing to track this data will reveal if any system starts to fail under changing conditions. Even if shifting seasonal trends don’t affect a warehouse much, there is always something that warehouses can do to improve. Continually looking for places to optimize will help facilities keep up with increasingly efficient competitors.

Technology in Warehouse Operations and Beyond  

Finally, don’t overlook the powerful technologies that are available today to help drive efficiencies inside and beyond the warehouse.

Robotics has come a long way and can help make the warehouse more efficient in many ways, from automated storage and retrieval systems, conveyors, sortation systems and voice and light picking systems, and even “cobots” (collaborative robots). Such technologies can help select, sort and move pallets and product more efficiently around the warehouse.

In addition, solutions like Demand Sensing and MEIO (Multi-Echelon Inventory Optimization) can make a big difference in helping managers stock the optimal amount of product at the right locations, based on real-time demand, shipments in-transit, and inventory levels elsewhere in the supply chain. Dock Scheduling solutions automate the scheduling of warehouse dock doors and in combination with logistics management or Transportation Management Systems, provide visibility to inbound shipments and orders and help streamline and coordinate the flow of product into and out of the warehouse.  

Also, network platforms solutions for managing supply chains include all parties in the supply chain, and can take data from warehouse operations to improve efficiency and visibility elsewhere in the supply chain. Similarly, they can share outside data (such as the orders on a truck, its exact location) with warehouse operations to help them prioritize, plan and execute more efficiently.

Better Warehouse Organization Improves Productivity

Warehouse organization is a long, ongoing and often complex process. While it can seem intimidating, it’s a necessary step towards improving operational efficiency, which is increasingly crucial. By putting more effort into organizing warehouse floors and workflows, businesses can become more agile, productive and profitable.

These five steps are not an exhaustive list of ways to improve warehouse organization, but they represent the most critical fundamentals. By practicing these solutions, facilities can make substantial improvements to their organization, leading to higher productivity. In an increasingly demanding and competitive industry, these improvements are too valuable to ignore.

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Emily Newton