How Warehouse Operations Improve Profits

In the late 1800s and early 1900s, Frederick Taylor used to use a stopwatch to figure out how to make labor process more efficient. We may laugh at this thought from behind our computers, but Taylor was one of the first to popularize an idea most of us take for granted: improving operations improves profits. This idea isn’t limited to any one type of work but applies to almost everything we do, including storage and order fulfillment.

A Distribution warehouse utilizing floor storage and selective pallet rack

When warehouse operations lag, it causes ripple effects through the organization

Taylor talked about workers and systems, but we’re going to focus on the warehouse layout and storage system, and how they either help or hurt operations (and profits). First, let’s look at what can go wrong when poorly-designed warehouse operations are the M.O.

  • Order Picking Errors

    A sub-par storage layout makes it easier to make order picking errors. Unnecessary foot travel, for example, not only increases the time needed to pick orders but also allows for more opportunity to lose focus and pick incorrectly.

  • Poor Workflow Efficiency

    Poor workflow efficiency means using more time and energy than what’s needed to get something done. It’s not hard to imagine how poor workflow efficiency hurts a business’s bottom line and bleeds over into other aspects of operations.

  • Increased Labor Costs

    Increased labor costs can be a direct consequence of poor workflow efficiency. Poor workflow efficiency can be camouflaged or missed entirely until it rears its ugly head as increased labor costs. Increased labor costs without a corresponding increase in sales eat away at profitability. Designing a warehouse layout and storage system that’s customized to the business’s needs help reduce labor costs by increasing labor efficiency.

  • Redundant Product Movement

    We’ve all heard some version of the saying “Never touch it twice.” It’s a good rule-of-thumb because “touching” things twice, whether an email in your inbox or physical inventory, usually means you’re doubling your work without doubling your output. When we have redundant product movement, we waste time and effort.

  • Incorrectly Shipped Orders

    Shipping the wrong order is costly, especially when it happens all the time. There’s not only the actual cost of shipping the product, but the time wasted restocking the order. The less optimized a warehouse storage system is for an organization’s goals, the more common symptoms like incorrectly-shipped orders will become.

  • Unnecessary Product Damage

    Unnecessary product damage is sometimes caused by careless handling, but it can also be a sign of inefficient warehouse systems. Redundant product movement, excessive walking and lifting, and time constraints caused by inefficiency can all lead to an unhealthy amount of product damage. And, if you’re like a lot of businesses out there, damaged products aren’t going power you to your Q4 goals.

  • Frustrated Employees and Low Morale

    It’s hard for even dedicated professionals to take their roles seriously if it seems like the system in place is working against them. When the warehouse equipment, layout, and operations are inefficient, it means workers are doing more work and getting less out of it. Knowing this can be demotivating and decrease productivity that much more, weakening profits.

Benefits of Improving Warehouse Storage and Operations

Now it’s time for the upside of improving warehouse operations. If your warehouse isn’t up to someone like Taylor’s standards, it’s not all doom and gloom. It just means there are plenty of opportunities to reap the lucrative benefits of making improvements.

A bustling distribution warehouse filled with selective pallet racking at full capacity

Improving warehouse operations starts a virtuous cycle that can increase profitability.

  • Better Order Fulfillment

    The simplest and most direct advantage of a more efficient storage and order picking system is better order fulfillment. When the name of the game is improving warehouse operations, better order fulfillment is usually near the top of the list as an important performance metric. More accurately-picked orders going out the door translates to more revenue coming in the door.

  • Better Workplace Practices

    There’s an old adage that says excellence is a habit. This is just as true in the warehouse as it is for a professional athlete or musician. Improving and optimizing warehouse operations doesn’t just mean buying new equipment or improving your layout. It also means adopting new habits and systems of doing things that work in favor of the organization’s goals.

  • Better Utilization of Warehouse Space

    When you’re storing inventory, space is money. Maximizing space utilization is a money-saving venture in more ways than one. It not only frees up more room for storing inventory but often organizes and streamlines the order picking process.

  • Increased and Accurate Inventory control.

    Putting a focus on optimizing warehouse storage often leads to better inventory control. Having a tightly-controlled inventory increases profitability by helping organizations stock what’s needed to satisfy customers while avoiding overstocking and over saturating their own inventory.

  • Dedicated Workforce

    Just as having outdated or poorly-designed warehouse operations can be demotivating for personnel, having a well-designed warehouse storage system in place can be a huge boost to employee morale. Improved systems and equipment make workers’ jobs easier and safer, and sends a clear signal that the organization is investing in them and in itself. Workers who feel motivated and safe will be their organization’s biggest asset.

  • Labor Savings

    Labor savings are a clear and concrete way in which improvements in warehouse operations show up in the bottom line. Optimizing storage and fulfillment systems reduces inefficient labor and redirects it to more profitable activities.

  • Fewer Mistakes

    We all make mistakes but most of us wouldn’t mind making fewer, especially if it meant increasing profitability. Mistakes like shipping incorrect orders, miscounting inventory, and order picking errors erode profitability. Mistakes can never be totally eliminated, but decreasing the number of mistakes is part of a smart warehousing strategy and over time helps boost the bottom line.

Start Improving Your Warehouse Operations Today

Often times the warehouse gets neglected because of cost, yet safe and efficient warehouse storage systems are proven to improve profits. Organizations should understand that an effective storage system creates a smoother operating and in turn more profitable business.

Think your warehouse has room for improvement? Start today by talking to one of our helpful Systems Design Specialists. We’ll work in partnership with you to get your warehouse operations in sync with your goals.

Give us a call at 800-722-5908 or send us an email.

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About AK Material Handling Systems

We deliver value to our customers by providing the absolute best combination of quality products, helpful customer service and competitive pricing. We specialize in warehouse layout & design, pallet rack systems, engineered sales, mezzaninesmodular offices and completed turn-key warehouse systems. For more information email us or call (800) 722-5908