Supply Chain Enabled

Maximise your operational capacity by optimising warehouse design

Published: May 30, 2023
Author: Prashant Kumar

Warehouse improvement and efficiency are very important as they can help reduce costs, improve operational efficiency, improve the utilisation of space, increase inventory accuracy, reduce the need for manual labour, improve customer service, and so on. The topic will focus on warehouse objectives, challenges, and opportunities.

The main objective of the warehouse is “to manage in the most efficient manner the receiving, storage, protection, retrieval, and shipment of products to support the business.”

In order to achieve this objective, companies have to overcome a lot of challenges. Some of the key challenges are:

  1. Volume increase for growth
    • Space Constraint: The main challenge is physical space within the warehouse, as volume increases, available space becomes insufficient
    • Inventory management: Managing a larger volume of inventory becomes more complex. It becomes challenging to maintain accurate stock levels, track item locations, and manage replenishment cycles.
    • Operational efficiency: Higher volumes can strain existing processes and workflows; process bottlenecks may arise, reducing throughput and productivity. Continuous process improvement and workflow optimisation become crucial.
  2. Lack of available warehouse space in the market
    • Increased rental and real estate costs: When warehouse space is scarce, the demand for available space exceeds the supply, driving up rental and real estate costs. Businesses may face higher leasing or purchasing expenses, which can impact their profitability and overall operating budget
    • Decreased operational flexibility: Insufficient warehouse space limits the flexibility of businesses to adapt to changing market conditions or handle seasonal fluctuations in demand
    • Supply Chain Disruptions: Lack of warehouse space can contribute to supply chain disruptions. Businesses may struggle to receive, process, and distribute goods in timely manner, leading to delays, longer lead times, and potential stockouts that impact buyer-supplier relations, overall supply chain performance.
    • Inefficient inventory management: The lack of warehouse space restricts businesses’ ability to store and manage inventory efficiently, making it difficult to organise products and optimise storage configurations
  3. Additional Inventory Resilience
    • Supply Chain Disruption: Warehouse operations heavily rely on a smooth and uninterrupted supply chain, and any disruptions in the supply chain, such as delays in shipments, manufacturing issues, or natural disasters, can lead to inventory shortages or excesses.
    • Demand Volatility: Fluctuations in customer demand can create challenges for inventory management. Sudden spikes in demand may lead to stockouts, while unexpected drops in demand can result in excess inventory.
    • Operational Constraints: Warehouses often face operational constraints that impact inventory resilience. [Limited storage space, inefficient material handling processes, or inadequate warehouse layout can hinder effective inventory management.]
    • Seasonality and Product Obsolescence: Seasonal fluctuations and product obsolescence pose challenges to inventory resilience. Seasonal products require accurate demand forecasting and planning to avoid excessive inventory during off-seasons and shortages during peak periods.
  1. Limited Labour Availability
    • Reduced Operational Capacity: With limited labour availability, warehouses may not have enough staff to fully utilise their operational capacity. This can lead to underutilization of resources and a decrease in overall productivity.
    • Increased labour costs: When labour availability is limited, the demand for labour often exceeds the supply, leading to increased labour costs.
    • Inefficiencies in processes: A shortage of labour can result in inefficiencies in warehouse processes. The lack of sufficient manpower can lead to longer wait times, delays in order fulfilment, and increased error rates.
    • Difficulty in managing during peak periods: During peak seasons or periods of increased demand, limited labour availability can exacerbate challenges. It may be challenging to scale up the workforce quickly to meet the surge in orders. This can result in backlogs, delayed deliveries, and missed sales opportunities.
  2. Higher Energy Costs
    • Increase operating expenses
    • Reduce profitability
    • Impact on planning and budgeting
  3. Loss of Space to manufacturing: When manufacturing lines are added, warehouses tend to lose space, and this is common when manufacturing and warehouses are co-located (esp. in pharma, healthcare, etc.).
  4. Managing On-Site vs. External: Managing on-site and external site challenges is critical to the success of any business, especially those that operate in physical locations such as manufacturing plants, retail stores, or service centres. Some of the challenges associated with onsite are employee management, safety concerns, maintenance, and operations. Some of the challenges associated with external sites are supply chain disruptions, lack of visibility, market competition, etc.

Again, in order to tackle the challenges, there are potential opportunities, and some of them may not require a high level of investment. Some of the opportunities are:

  • Slotting: It is a procedure used to optimally place individual goods within the warehouse

Routing Policies and Strategies: Clearly, the selection of the order picking method influences the travel distance required. Some of the routing strategies are below:

  • Racking layouts and configurations
  • Inventory Policies
  • Energy Retrofits
  • Automation: It is very important to leverage data in order to drive automation. Some of the useful data required is:

Supply Chain Enabled
Supply Chain Enabledâ„¢ - Receive supply chain insights, best practices, and news
Sign up to our communications list