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When most warehouse managers hear the term “overhead”, their first instinct is to imagine the space they have between the top of their storage and their roof, but it has another, slightly more business-centric meaning.

“Overhead”, in the ever-present world of finance, refers to the costs incurred by running business above and beyond your gross income. As you can imagine, most business owners look for ways to minimize these expenses without hampering business operations or losing valuable staff, and the balance can be a tricky one to strike.

There’s always a few places to look when trying to reduce overhead in your warehouse, including some common places you might not have even considered yet. Here’s a few proven tips for reducing overhead in warehouses, and what they can do for you:

The Overhead: Decreased Productivity

A lot of warehouse overhead and expense can be brought in by declining productivity levels in operations. This isn’t to say you have unproductive workers by any means; instead, you may have a bottleneck in processes or a complicated warehouse layout that prevents work from getting done as effectively as possible.
The Reduction: Optimized Facility Layouts
By strategically rearranging your warehouse layout, you can reduce travel time and decrease costs associated with things like labor hours, maintenance on needed equipment, and more. Set an inventory priority and arrange it on your warehouse storage by priority and need to make sure the most popular items are getting handled in the order they need to be, as fast as possible.

The Overhead: Unexpected Product Demand

Especially as the holiday shopping season inches ever-closer, the risk of sudden unexpected spikes in product demand can leave unprepared warehouses scrambling for a solution and short on inventory. This can be a twofold expense: the rush demand for more product means higher shipping costs and the risk of having to source from a vendor you may not have a strong relationship with, as well as the risk of sitting on unsold inventory in the event of the new product arriving too slowly to meet demand.
The Reduction: Increased Demand Forecasting
By implementing a better demand forecasting strategy, you can better estimate product quantity based upon previous activity and determine an active inventory level that can better balance your on-hand products with the products you’re expecting to need.

The Overhead: Product Cost

That said, in-demand products aren’t the only ones your warehouse is going to need to stock. General product cost can really start to add up if it isn’t carefully monitored, and opportunities need to be sought to reduce the cost of these products at any given opportunity.
The Reduction: Bulk Purchasing
On any item that moves quickly or can be sourced more cheaply, bulk discounts can be a lifesaver. Work with your vendors to determine the best bulk rate for both parties and buy as much of your inventory this way as possible to reduce product expenses in the long run.

The Overhead: Shipping Expenses

Whatever your warehouse stores, it has to move those products somewhere. Whether you sell direct-to-consumer or distribute products to other retail outlets, the cost of shipping can add up pretty quickly and begin to severely impact your overhead.
The Reduction: Cross-docking
Cross-docking is the process of unloading goods from an incoming shipment (whether from truck, railroad, or other methods of transport) and loading them directly onto outbound shipments without taking the time to stock them or count them as inventory. This can actually help to reduce a number of expenses, from inventory processing and labor spent on stocking these products, to shipment costs associated with lighter-than-load or expedited transport by giving you a more efficient way to ship items to their destination without the associated shipment and handling costs.

By implementing these four strategies in any warehouse you operate, you should begin to see a pretty substantial reduction in overhead and increase in gross income overall if implemented correctly.

One Response to “Four Ways To Reduce Warehouse Overhead”

  1. chad says:

    Hi i’m Chad and i like shelves

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