What ‘s limiting the effectiveness of your operation?
If you would like to lower costs, increase profits, and see high customer satisfaction rates, it’s important to analyze your warehouse operations to measure productivity and to identify patterns and trends so you can determine exactly how you are doing and what improvements you need to make. This is where an audit comes in. An operational audit or assessment will help you clearly see what’s working and what’s limiting your operation’s effectiveness. Let’s take a look at what’s included in an operational audit.
Key Areas to Evaluate
The critical areas that should be assessed in the warehouse are facilities, labor, workflow procedures, and systems.
Facilities should be examined to determine whether you have enough space and whether you are using the space efficiently and cost effectively. Are you adequately using available cubic space? Inefficient use of the available cube can mean increased costs for additional warehouse space that you may not really need. You’ll also want to examine your occupancy costs (lease or depreciation costs of building and equipment, utilities, maintenance, insurance etc.), and you’ll want to take a hard look at your housekeeping because the cost of occupancy generally goes up as housekeeping standards go down.
Getting the most for your payroll dollar should be a priority. You’ll want to analyze productivity by measuring the number of work units processed in a given amount of time. The cost of your labor, both direct (the labor force directly involved in physically handling materials and indirect (clerical workers, administrative staff, security, etc.) are a crucial measurement in an operational audit as well. Other metrics include employee turnover rate and your local labor market (low unemployment rate may mean that you will have to pay higher wages, thus increasing your labor cost).
The goal here is to minimize the number of times a product is handled as well as the number of steps it takes to move the product through the facility. As you track the movement of goods you’ll want to assess how the current layout helps or hinders the workflow. Are you using the right material handling equipment and the optimal storage systems for your product?
A Word on Benchmarking
The audit should consist of a method for evaluating your own operation against your existing expectations as well as comparing to companies similar in size and type. By analyzing your operation against both internal and external expectations, you can develop a basis of measurement for future actions and improvements.
Next Level understands the impact of operational costs on any size business, and we are committed to helping our customers increase efficiency and profitability through lower material expenditures and cost efficient design solutions. Contact us any time with your material handling and warehousing questions – we’re here for you!