Coincidence or not, but after the Central Planning Bureau announced fine economic growth figures last Thursday, spring seemed to break through last weekend. People everywhere took to the terraces or started digging up their gardens, as if to immediately fulfil the CPB's expectation that consumers, too, will start spending more money again. It is all good news for logistics Netherlands. Economic growth of 1.7 per cent this year and 1.8 per cent next year means more orders, higher stocks and fuller warehouses.
But what do you do when the warehouse gets so full that the efficiency and quality of the operation suffers? The first resort is to rent extra warehouse space externally, for example that empty hall down the road or at the logistics service provider around the corner. That provides extra time to think about a more structural solution such as investing in a space-saving storage concept or a completely new building. The question is whether this is necessary. Those who take a critical look at their stock may be able to avoid or at least postpone a warehouse investment. Here are four tips.
1. Increase storage density
In many warehouses, every pallet bay is the same height, often tailored to the maximum pallet height encountered in operations. This offers great flexibility, as any pallet can be placed in any bay. However, if not all pallets reach the maximum height, this flexibility comes at the expense of a significant amount of storage space. You should therefore regularly analyse the height of the pallets entering your warehouse and adjust the height of the storage locations accordingly. This leads to higher storage density, allowing you to store more pallets in your warehouse. And if you have a good warehouse management system (WMS) that automatically assigns each incoming pallet to the most suitable storage location, you won’t have to compromise on flexibility.
2. Tidy up your stock
Do you actually need all that stock in your warehouse? In practice, it’s time and again found that many warehouses are full of items that are only sold a few times a year, or sometimes not at all. In such cases, it’s worth hiring an inventory specialist to analyse your stock levels. Based on historical data, it often quickly becomes apparent that there are too many slow-moving items in stock. It’s also important to clear out ‘dead’ stock quickly. This may seem like a waste of capital, but don’t forget that these items take up space that costs money and no longer generates any turnover.
3. Look at your suppliers
A simple calculation shows that stock levels must, at the very least, be high enough to bridge the gap until the next delivery. In other words: the longer the lead time, the higher the stock levels. If deliveries have to come from the Far East, this can quickly lead to high stock levels. It is therefore worth taking a close look at your supplier base. Are there alternatives to suppliers from the Far East? Even if a supplier in Europe charges slightly higher prices, those extra procurement costs may well be offset by lower stock and storage costs. An additional benefit is that the risk of dead stock is reduced. If no alternatives are available, have a chat with your suppliers. Perhaps it would be no trouble at all for them to achieve shorter lead times.
4. Have a chat with production
In the warehouses of manufacturing companies, stock levels often depend on the batch sizes in which products are manufactured. In many companies, there is still a prevailing belief that these batches must be as large as possible to reduce changeover times and increase productivity. Whilst this does lead to lower production costs, it also results in higher stock and storage costs. The trick is to implement a production plan that reduces overall costs. Another question is whether it is necessary to keep all product variants in stock. Perhaps it would be wiser to shift the customer order decoupling point, keep semi-finished products in stock, and only manufacture a finished product when an order has been placed for it.
Marcel te Lindert - Journalist logistics & supply chain
