Improving Profitability Through Warehouse Transformation

Recently we’ve been talking to distributors and manufacturers about the impact of eCommerce on their business as well as assisting on their 2018 planning.  While growth is a recurring theme (as expected) as is the goal of improved profitability, an area that unites these two is the ability to cost-effectively deliver the business.  Cost-effectively is being defined as ways to “enhance / improve / reinvent” the operational (warehouse) aspect of the business.  How to do more better, faster and more accurately. In essence, how to transform warehouse operations.

While few, if any, refer to reducing their workforce, an unsaid comment is “many of the people in the operational part of my business are getting older and I need to think about doing more with less” or “our marketplace is very competitive for people and we ‘churn’ people in certain roles so I need to simplify the role or automate it / reduce the number of people in these roles.”

And essentially the question becomes, “how can I turn a cost center into a profit center?”  Last month we touched on talking about RDCs as revenue generators … reasons why you should earn business.  Now we turn to Howard Coleman from MCA Associates  to share thoughts on the 4 components needed to transform your DC / warehouse from a cost center to a profit center:

1. The “10 Plus Wastes to attack”
2. “5 potential “design concepts” you can employ
3. the performance metrics to “baseline” and continually measure your operations and
4. the  initial steps to take”.

The goal is to achieve this quickly, hence the theme for his white paper Do You Have A Strategy for Speed? as improving the profitability and winning business requires transforming elements of your business … quickly … to capitalize on opportunities.

Some key points from the white paper:

• I’ll bet you – that upwards of 60% of the activities you perform in your DC or warehouse add no value…its waste! Your processes and workflows are limited by these constraints. They limit your performance! So it seems only logical that by identifying and eliminating these wastes you can attain the greatest potential source of performance improvement. This is a basic “lean thinking” principle. The objective is an “expected outcome” – in other words, obtaining consistent results at lowest cost.
• “HVPZ” (high velocity pick zone).
• Narrow aisle storage
• The days of typical 7:30 a.m. to 5:00 p.m. working hours in today’s DC’s or warehouses may slowly be coming to an end as a
  way for companies to extend their “open for business hours”
• Lean Thinking, Design & Metrics

If you are a distributor (owner, operations role or branch manager) or a stocking rep, I encourage you to download the white paper and to ask Howard about his operational audit and his work with distributors.

If you want to improve your net profitability, you need to either reduce operational costs and/or increase throughput.  Selling more, while maintaining gross margins and reducing operational costs assigned to an order is a recipe for profitability success.