Every square meter in the warehouse costs money. Especially when productivity of the warehouse space is not optimized. But how do you define and measure the productivity of the warehouse space and how can it be increased? We spoke to LNConsult Account Manager Peter Ekart and summarized the most important issues based on his experience.
How can we define warehouse space productivity?
During the whole supply chain process, the warehouse space is relevant for goods received, storage or transshipment, order picking and dispatching / delivery.
To be able to measure productivity well in this overall process, you first and foremost need very well-maintained logistical master data. These are either provided by the manufacturer or must be generated by the customer as soon as the goods are received. This data is then stored in the goods management system (WMS or ERP) and builds the base for any further process step. From the transfer of the goods to the warehouse, storage and dispatching, the master data is extremely important in terms of efficient processes.
How do you measure the productivity of warehouse space and which key performance indicators could be helpful?
Key performance indicators that reflect the processes and throughput in the warehouse rely on the existing logistical master data. Therefore, these are so important – no matter if a new warehouse is planned or an existing one needs to be optimized. The higher the degree of automation of the warehouse and the processes, the more precisely the logistical master data (dimensions and weight) must be recorded and maintained to be able to plan the processes as accurately as possible.
Key performance indicators are tools to make processes transparent and to identify potential for optimization. They can be used for both, internal tracking of process developments and for external comparison (industry benchmarks). It is important to continuously record key performance indicators and to derive appropriate strategic and operational measures. Basically, we categorize indicators related to warehouse logistics as economic, service or quality indicators. Analyzing the warehouse space productivity is clearly unveiling economic potential. Also known as "space performance" it represents the warehouse turnover per square meter in relation to the occupied warehouse space.
Which value should be achieved in terms of the key performance indicators?
The aim is to use the warehouse space optimally and not to "waste” any space. In the case of bulky products, this figure will of course perform worse. At this point, however, it also becomes obvious that the accurate recording of product master data is so important: the better the recording, the more efficient individual products and containers can be stored in a warehouse without taking up space that is not necessary. Many times, we have been able to realize enormous potential in the course of a logistics consulting project by the rigorous collection and maintenance of master data. Not only the productivity of the warehouse goes up – sometimes we also proved, that a planned extension of the warehouse is not needed anymore.
Giving any benchmark in general in terms of warehouse productivity is not possible. A general recommendation is to always track the own performance over a longer period of time and to strive for a positive development. Keeping an eye on industry benchmarks gives you an idea of what is possible.
Which trends are influencing the efficiency of warehouse space?
More and more logistics service providers are acting as so-called "extended arms" for production or assembly. This is because many companies struggle in managing orders or cannot handle a warehouse themselves due to a lack of labor. The outsourcing of certain processes is becoming more and more usual. Production stores raw materials at short notice or orders them "just in time” to not waste any storage space and to save costs in the end product. Logistics service providers generally strive for a faster throughput of products with a high level of efficiency in the "last mile" delivery. So-called "cross-dock warehouses” enable entire pallets and pre-picked goods to be handled quickly. The aim is not to store goods anymore, but to transship them directly and pass them on to customers. This relatively new development is becoming more and more popular, especially for groupage logistics companies and parcel service providers, as many incoming and outgoing goods can be processed cost-effectively.
Which digital solutions help to improve productivity in the warehouse?
There are various digital solutions to make the processes in the warehouse more efficient. The ProGlove Mark Display Scanner, for example, enables a simple and quick scan with a handle and the simultaneous exchange of information between the device and the customer's goods management system or ERP. Picking solutions such as Pick by light, Pick by Voice or Pick by Vision make the processes in the warehouse easier for employees. The integration of digital solutions in logistics is always aimed at increasing the productivity of the warehouse space and thus also saving costs.
To what extent is it possible to increase the efficiency of warehouse space?
Giving a general number here is simply not possible. However, I would like to mention an impressive project at this point. It is a very good example to express in numbers how the accurate recording of master data can improve the productivity of warehouse space.
In the course of a logistics consulting project for a Serbian customer, we were able to cut down a calculated target warehouse space from 26,000 m2 to 18,000 m2 - "only” by correctly recording product master data. The saving of around 8,000 m2 of warehouse space was of course also measurable in terms of financial savings and this could be invested in automation and new warehouse technologies instead.
Peter Ekart, Account Manager LNConsult