Strategies for tackling common costly “offenders” in warehouse operations
Photo by Ryan Parker
By Bob C. Kennedy
Recently we conducted a poll of our network of INBOX readers, asking them to choose the most daunting challenge facing logistics professionals in 2025. Not surprisingly, the number one response was managing higher costs. Businesses are paying a higher price for labor, insurance, land, taxes, regulations, and transportation due to factors way outside the control of the distribution center.
There are a few areas that the warehouse manager can control to counter higher costs, and most require time, money, and resources. New automation technologies and systems can help maximize warehouse productivity and reduce costs but can take a year or longer to implement. You can try to renegotiate agreements with vendors, suppliers, truckers, and landlords, but that also takes time.
Just because you won’t see any impact in the short term doesn’t mean you shouldn’t embark on these efforts. In fact, it’s a good practice to create a schedule to reassess your major cost components annually. But at the same time, you should develop a strategy to tackle what you can affect now: the low-hanging fruit.
In my experience, the best operations include periodic self-examination of their operations. Every distribution center, regardless of its performance, can be made better by delving into their operation. Ask your team: Where are the current pain points? What can be done about them right now? If you don’t have the staff on hand to conduct such reviews, there are dozens of specialty consultants who can do it for you without costing an arm and a leg.
Over decades of work with warehouse managers, I have identified several known offenders that frequently find their way into operations. Here are some examples:
Misplaced inventory and inaccurate counts: Operations almost always have less control over their inventory than they think they do. The accuracy rates they tout don’t hold up when scrutinized. Accuracy is not just about the total count, but about the individual counts of pallets, cases, and eaches in the right location. And the counts must be done at the lot level.
For example, overflow pallets are often not where they should be. Or, where multiple lots are stored in the same location, the actual “by lot” counts can be off. These situations occur most often in operations with limited system capabilities, where accuracy is too reliant on worker discretion. The negative impact of misplaced inventory is a serious productivity vampire, requiring extra time to search for a storage location or to find the right item to pick, extra time to correct pick errors, and extra investment in personnel to manage the inventory (i.e., extra cycle counts).
The long-term solution is a more capable system. But even in the current environment there are good practices you can deploy to minimize the incidence of misplaced inventory. This is the aim of our Blitz program – a quick, five-day top-to-bottom assessment of your operation. We can help you find the low hanging fruit you can address right now.
Inefficient picking and storage strategies: Most WMS products will enable you to organize your inventory according to ABC velocity rules. This applies to both reserve / pallet storage and pick lines. Even the most rudimentary locator systems can support this. There are third-party tools that can do the analysis for you and are not too expensive. Typically, an ROI on slotting tool is pretty advantageous. For example, last year Lucas Systems rolled out a new dynamic, AI-powered reslotting technology that could provide a huge payback, promising 10-20% in labor cost savings.
These tools are designed to reduce travel distance, both for your walking and driving workforce. Depending on where you are now, the impact of velocity zoning can be enormous. It can be done using data that you already have and rolled out manually in a manner that minimizes the impact to your current operation.
Bloated shipping and transportation costs: Distribution operations frequently leave money on the table regarding their contracts with shippers, including UPS and FedEx. The transportation world is very dynamic, with rates changing more frequently than your contract renewals, especially when you have multi-year contracts. There are companies that specialize in doing audits of transportation costs that regularly produce savings.
For example, the team at TransImpact has developed a process to save their clients an average of 15%-25% on parcel shipping. The process is simple: TransImpact will conduct an audit of your shipping costs free of charge, collecting a portion of the savings that they create for you.
So while you devise strategies for long-term improvements, get to work on recognizing the cost savings that may be right under your nose. This is something you can do yourself, but sometimes getting an outsider’s perspective can help you find new opportunities. RCK and our network of experts and partners can help. Contact us now.
