Warehouses are generally oversized storage facilities used by companies to manage inventory before it is moved down the chain to consumers. Whether it is storing hardware, retail products, food, or building materials, anything and everything can be stored in a warehouse.
The History of Warehouses
Even though most of today’s warehouses are largely run by automation, inventory storage has been a crucial part of the world’s economy for thousands of years.
Warehouses have always been a pivotal way to store and manage inventory. Ancient Romans built the horrea gablae, storage houses of oil, wine, and even marble as early as 2 B.C. In the Middle Ages, commercial shipping reached new levels of popularity and accessibility, and the first known commercial warehouse was built in Venice. At the time, Venice was at the center of all European trade routes.
Today, companies like Amazon have warehouses in major cities around the world, and even beyond physical warehouses, the cloud stores technical data in a similar way.
The traditional meaning of warehousing has changed in recent decades with the introduction of automation and the evolution of technology. Some companies have even done away with warehouses, adopting just-in-time techniques. The JIT model promotes product delivery directly from the supplier to the consumer, cutting out the need for warehouses altogether. However, one honorable mention for warehouses is that the growing use of offshore outsourcing for products creates a necessity for storage and shipping. Warehouses can be utilized with these overseas shipping methods, expanding the shipping range for companies. On a large scale, overseas outsourcing is too massive of a job to not have warehouses for distribution use.
Recent trends in retail have even led to the development of warehouse stores, and high-ceiling buildings that not only sell retail goods but the products are perched on industrial racks instead of the conventional retail shelving units. Essentially, items ready for sale are within the reach of the consumer while stored inventory stays above. In this case, Costco and Sam’s Club’s business models serve both as a warehouse and as a retail store. The cost of constantly moving products can be lowered if not almost eliminated when they have high quantities of product on hand.
Warehousing in the Modern Age
Warehouse operations are generally behind the scenes and invisible to consumers, but they are vital in ensuring accurate, efficient, and successful deliveries. To achieve this standard, warehouses must run like fine-tuned pieces of machinery.
Every business has its own unique needs, whether it is in the form of large shipping warehouses to small business owners. But regardless of the size of the business, at the heart of the operations there are three key points to remember to ease the burden of keeping track of your warehouse:
- Inventory and Stock Management
- Warehouse Management
- Financial Accountability
Below are several tips and tricks to help ensure seamless warehouse success. Each of the three key points is crucial to help the warehouse run as efficiently and accurately as possible.
1. Inventory & Stock Management
Let’s start with the obvious: the goal of inventory management is to efficiently and effectively order, store, pick, and move the materials needed to make products and/or fulfill orders. In other words, there must be an inventory for there to be a need for a warehouse.
The first step is to order your supplies.
Once you have submitted your order for the right amount of inventory, you will need to make sure that you receive it accurately. That means the product should be shipped to you in a reasonable amount of time. It also means that the received supplies are not different from the ones originally ordered. Far too often supplier errors happen, and you must be diligent to work around them. If you are not focused on systematically receiving your inventory, you might get shorted, overcount, or underestimate your inventory. All of these can lead to a decrease in your margins as well as inventory shrinkage.
Counting Your Storage
To ensure inventory is received correctly, companies should unpack all boxes as closely together to the time they receive them as possible. That way the order is in a relatively close physical location. Each package can be counted, and it is at that time that the items received can be checked against original purchase orders for discrepancies. These steps can help prevent stock shortages, backorders, and financial losses. If you do find errors like wrong, shorted, or missing items, note them and contact your supplier immediately to resolve the issue.
Stock management is similar to inventory management, but stock generally refers to finished products ready for sale or distribution. Inventory includes all materials, including raw materials and parts needed to create your final product.
Stock management is therefore a subset of inventory that focuses on keeping as little stock on hand as possible at a time. This is to save on both space and costs, as well as to make sure that there is not a waste of having too much stock at once. It also presents the challenge of still being able to meet customer demands.
For example, if you have a popular product, you will need to decide whether you are going to have copious amounts of your product on hand in anticipation of sales. On the other hand, you could decide that each transaction will be made to order. Can you afford to assume sales patterns?
Once you have an inventory, how do you keep it organized? The next step is to categorize your products.
Labeling and Tagging Your Inventory
All products, including the little stickers on produce at the grocery store, give a product barcode or serial number to keep the products in check. It holds the product owner, the shipper, and the consumer accountable throughout the transaction of where the item is. It also helps when inventory is out of order or not accounted for.
Once you physically have your products from your supplier, you will need to tag and label your inventory. That way it is ready for the floor and organized internally.
The product tags should include both the price of the item and a label using either a barcode or serial number, and then internal business servers can monitor product movement throughout the warehouse.
Regardless of the type of tagging system you use, it is good to get into the habit of tagging inventory during the inventory receipt from the supplier. That way you can ensure the task of tagging is not overlooked and it prevents unlabeled stock from being put on shelves/displayed for sale. All items will be accounted for from the time the delivery arrives from the supplier to the time it is in the consumer’s hands.
Labels are also forgiving, and they can be fixed directly to product packaging, the price tags, or on the shelves themselves. There is flexibility to where you can place the label. Sometimes inventory can even arrive prelabeled with the bar codes from the manufacturer or supplier. This is a good way to save time and energy and save you a step by only needing to add a price to the label before the item goes on the shelves.
2. Warehouse Management
Warehouse management is the next step in the ladder to success, and it is a broader way of looking at warehouse operations. Once you have your inventory accounted for, how is your warehouse set up? The organization and design of your space can radically change the efficiency of your business.
Every inventory item has its place. One example of proper organization would be the layout of a grocery store:
The grocery store is organized, listing different products to different aisles depending on the need and practical use of the product. Lettuce or carrots would not likely be in the same aisle as the flour and sugar, but why is that? Produce is perishable and should not be sitting on a shelf next to nonperishable items. Instead, the grocery products are respectively placed in convenient locations based on the traffic patterns of customers.
The lack of planning can be costly for the business owner, and it could even lower the shelf life of the product. The same goes for most business models.
If you managed a woman’s clothing store, you would likely put the summer sandals next to other summer shoes, but maybe keep them separated from the winter boots and jackets. Seasonal products should be categorized to help the seller, not hinder them.
For online products, it is best to keep the most recent models or updates at the forefront of the digital warehouse. If there are two security products next to each other but one of them is three updates behind the current model, it can be confusing and outdated.
The organization is just one key part of managing your warehouse, and there is not a one size fits all model. Even restructuring your floor plan to fit the needs of your business can make the overall layout of your operations more efficient. Because supply and demand change continuously, you should make storage changes to accommodate them. It can elevate production and efficiency.
Someone must be putting your inventory on the shelves, and you will need to account for hiring and managing labor. Will you hire people to work for you and help keep your warehouse afloat, or will you opt for a more automated design?
Hiring employees can save money on the front end, and it can help relieve the burden of managing all aspects of the warehouse on your own. Delegating employees to different tasks ensures that every person has a specific role to play. From accounting to moving boxes, designing specific roles will help the bulk of the work. This also avoids the business owner wearing all the hats in the warehouse.
Of course, this process takes time. Hiring quality employees can take up a good amount of time, from interviews and background checks to on-the-job training. Employee satisfaction trickles down to customer satisfaction in the long run.
An alternative to hiring employees for moving inventory and keeping track of supplies is to purchase machinery to do it for you. It is more expensive upfront, more than the price of hiring employees, but it also works differently. Machines do not have the same type of work errors, or human errors, but can break down over time without safe and proper maintenance. Keeping your automation in tip-top shape is important if you choose to automate your warehouse instead of hiring employees for those roles.
Automation is also a clever alternative to needing workers’ compensation for employee wages.
Once you have your inventory and your employees, the next step is to fulfill your orders from customers.
Delegate tasks from pulling inventory from one side of your warehouse to the other. Sometimes products can be shipped as-is, but often the product will change hands multiple times before leaving the warehouse. Create a clear way to move the product, account for where it is going to, package it, and ship it to the customer.
In today’s age, it is common for companies to keep the customer informed on all steps of the purchase. From the time of the order, they can be notified of changes to their order and can report an estimated time of arrival of their product. The transparency builds trust between the business and the customer and honoring the estimated shipping schedule can increase customer satisfaction and return customers.
3. Financial Accountability
Once the business can cross inventory and warehouse operations off their list, the most daunting task can be keeping up with the financial aspects of running a warehouse. There is a balancing act of managing your margins. Finding a good balance of business expenses to business income is a good way to track how much inventory you can manage and move at a time.
When it comes down to inventory, you need to start with a competitive and dependable supplier. It can take time to find a supplier that meets your needs, understands your vision, and fits your budget, but once you secure a supplier it can be easier to keep track of your expenses and plan for future shipments.
There can be a lot of stress on the warehouse if there is not a steady flow of inventory from the supplier. In a pinch, the company could scramble to find a workaround in the form of emergency orders. Last-minute suppliers can be costly, adding to the expenses of the business.
In the last two years, suppliers have seen massive shifts due to the COVID-19 pandemic. The lack or delay of supplies has a direct effect on businesses, consumers, and overall economic stability. The cost and availability of materials are not always certain. Warehouses are continually adapting their business practices with suppliers to keep up with the demands of the consumers.
One tip is to have a backup supplier in the case of unexpected changes. It would help to navigate any order delays or unforeseen changes to your inventory.
Once supplies and shipments are secure, the business owner will also need to manage their staff. Accounting for staff wages, health insurance, bonuses, and workers’ compensation can help plan a budget around your estimated payroll. When audit season comes around keep track of your yearly staffing expenses including wages, PTO, sick leave, and turnover.
Before your warehouse can be up and running, you will need to decide to either lease or purchase a warehouse. What option is most feasible for your type of product? Once you establish a location, you will need to consider building and business insurance. It guarantees safeties the business might not otherwise have, but that peace of mind comes at a price. Budgeting for insurance is a good way to help protect the business. Consider not only purchasing insurance for the building, liability, and business property but also in the event of employee dishonesty or loss of income.
Company vehicles at the warehouses can be seen as an extension of the work and products at the warehouses. Proper coverage will protect not only the product but also the mode of transportation.
Regular building maintenance also means securing utilities, keeping working conditions safe and clean, and replacing or fixing broken machinery.
Security software and tech innovation are sweeping through all industries and having top-notch security software keep your investments safe. This means managing all aspects of your business from counting inventory, production progress, staff payroll, point of sale systems, advertising, marketing, website use, and at the root of it all, financial security.
Inventory management software can help the business track items throughout the supply chain the same way that a customer would be able to track their order. This way the business owners can track progress from the supplier through the assembly line, through storage, and to the sale. This kind of tracking can reduce overhead costs, which also keeps business finances in check.
Data Reporting and Planning
Data analysis is an essential aspect of business operations and warehouse operations. From counting inventory and stock management to tracking shipments and motoring the consumer market, data analytics can help navigate future success. New advancements in technology and software allow businesses to optimize their performance. It also helps to eliminate long-overlooked processes. Data-driven solutions are key to increasing warehouse productivity and efficiency.
Research on past sales can help navigate the estimated future success of a business. It is important to keep an eye on which products are the bestsellers. Optimization of these high request items can increase the margins and can be a high-priority item for both the seller and buyer.
When in doubt, consider the 80/20 rule for your warehouse model. The 80/20 rule recommends that 80% of your business results come from 20% of your efforts. When applied to inventory, it suggests that 80% of the business profits should come from 20% of the products. These products tend to move through warehouses faster than other products.
While some products may stay on the shelves longer than others, it is smart to rotate popular items that are bringing profit to the business. Utilizing these tools to drive decision-making allows businesses to reduce long-term costs for their products. Perhaps they can reform the product more efficiently or find specific suppliers for those hot items.
The Future of Warehouses
Google trends predict steady shifts in the interest of warehouses over time, but they do not bell curve in a direction of dire need or disuse. There will always be a need to store inventory and company products.
The future of warehouses is likely to increase due to the number of online shopping options available. As technology, safety, and faster shipping methods become available, warehouses will be a crucial step in having products shipped to consumers. The bones of the operations will remain the same.
Regardless of the size of the operation, at the heart of it, all will be inevitable inventory and stock management, warehouse management, and financial accountability.
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