I have written many times about the potential return on investment that a warehouse management system can offer a distribution company or a manufacturer engaged in distributing their products. In this series I will review the three key areas of warehouse activity and how money (profits) can be recaptured. These three areas I refer to are; warehouse activities, receiving activities and picking/shipping activities.
Let’s start with the warehouse activities.
With real-time and online data collection, inventory accuracy will be dramatically improved. This allows for a reduction in “buffer” stock and provides for better use of space through reduced inventories.
Let’s say your inventory value averages $5,000,000. If you could decrease that by 5% because you have substantially greater inventory accuracy and your inventory carrying costs average 20% you would save an estimated $50,000 dollars annually.
Eliminate Physical Inventories
This activity is extremely costly to a business. Bar coded data collected on a real-time basis will produce inventory accuracy up to levels of 99.97%. Errors in writing, reading, and keying in information will be virtually eliminated. The need to do a physical inventory is eliminated. A recent example of this at a local business looked like this. Twice a year at least 10 employees were instructed to do a physical inventory of the entire warehouse. These folks came in over the weekend spent two days counting and fixing the inventory. This costs the company nearly 20,000 dollars to perform. Cycle counting time and costs are also reduced significantly. The elimination of keypunch and verification processes reduces overhead in many cases by thousands of dollars.
Reduction of Paperwork
The transposition to electronic data eliminates forms and paperwork procedures and as mentioned greatly reduces manpower needs which in turn reduces overhead costs. Many of the companies are amazed by the cost savings in just paper and printing costs.
- More efficient use of lift trucks and other warehouse equipment will preclude the need to purchase additional equipment and reduce repair costs.
- Cycle count routines will be more accurate and less time consuming
- Improved customer service as a result of accurate, real-time data
- Job enrichment for users, a sense of value in improving operations
In part two of this three part post I will tackle the receiving process and review where the profit leaks are and how they can be controlled.
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Posted by iCepts Technology Group-A Pennsylvania Partner for Accellos One Warehouse Management Systems