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Considering Warehouse as Profit Center

Warehouses have come of age. So have the technologies that run them.
Not so long back, warehouses were treated as cost centres, always taking the back seat when it came to formulating business strategies for revenue generation. But times are changing.

This leads to my next thought. How do we look at warehosues as profit centers? what does it it takes to leverage a warehouse to generate revenue?
One sure way whould be to bring down operational costs by adopting to best practices, optimizations techniques, bring in efficient material handling systems and so on. All this needs to be thought of in granularity, i.e., whether its feasible or not, how to implement them, cost reductions it will bring in,  impact to revenue, etc. 

Coming to the Warehouse mangement system available in the market today; are they geared up to analyse and bring forward revenue generation aspects on warehouse operations over a period of time? Is this visibility a part and parcel of such systems today? Are customers keen on looking at such figures? 

This leads to my next blog on the various aspects that lead to income generation from warehousing operations - 

http://infosysblogs.com/supply-chain/2008/09/channels_to_leverage_warehouse_1.html#more 

 

Comments

Good Thought Rawat. To add further use of Automation - control systems for new palletizers helps material handling integrator to deliver fast returns on investment .

Good observation: This practice is being used a lot in 3PL managed warehouses and is permeating down the supply chain as well.

Good thought Lok. By bringing in 3PL Operation the warehouses are no longer a Cost group to the organization. With 3PL Operation warehouses are generating revenue and turning towards Profit Group.

Good article Lok.

When one thinks of a Warehouse as a profit centre, the immediate thought , especially in the current scenario of the economic slowdown will be to think of cost optimisation to boost revenues. Here are a few thoughts on optimising operations in Warehouse without additional costs which will result in more revenue

1.Layout and item flow in the Warehouse has to be closely monitored and reviewed. Layout may be restructured by providing cross aisles to reduce travel time. Fast moving items may be stored in easy to access positions. This will reduce travel time and in turn increase efficiency resulting in more order fulfilment per day.

2. Automatic Replenishments should be brought in, wherein the WMS system should replenish the golden zone frequently based on formula provided. This should be interleaved with picking task to reduce labour work. This will result in labour optimization and space optimization.

3. Packing process may be reviewed, and 'Pick and Pack' method may be introduced for small orders to improve efficiency and reduce work at packing station

4. Lean Warehousing is in. Proper Purchase forecasting will help in maintaining Lean Inventory which in turn will reduce inventory and maintenance costs.

Thanks Ashok for writing into my blog. The points that you have added are very much indeed cost busters and these do make a lot of sense for medium to large warehouses dealing with large number of shipments per day.
As you rightly said, a lot does depend on the warehouse layout and picking methodology, (Spiral, zig-zag etc) and how you place your fast moving locations close to shipping area to reduce travel time and also reserve locations to reduce travel time during replenishment. Apart from Automatic replenishment (which may be fired at a specified time during the day to check stock levels for active positions, whether they are below the threshold levels to initiate stock transfer), dynamic replenishment can also be carried out during a order allocation process. Here, the replenishment request is fired dynamically when stock levels shrink below threshold levels and the stock to be picked would include stock to be replenished in the bin plus stock to be allocated to the order.
Pick and Pack with carton allocation will make more sense, as it will assign you with a the right carton size thus minimizing cost.
Regular updates from suppliers on future shipments will help space planning and optimization.

Supplier Integration and Customer Integration is one of the key areas that drives Revenue generation in Warehousing Business.Apart from Optimisation that are carried internally inside a Warehouse,the above dimensions have to be developed,maintained and sustained clinically to improve the effectiveness of Operations such as MRP, Inventory management,Order Management which in turn become the key determinants of ROI in all Warehousing businesses.

Warehouse management system (WMS), think of this as a working asset. Wherein it works tirelessly, 24/7 and 365 days. If you have a good warehouse management system, you can sure cut cost on many things. It will not only help your employees in inventory and or customer service but also it will lessen losses, lessen paid employee's time, happier customers, and more profit. You can have Inventory management softwares or a total warehouse management system to help your business grow.

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