An efficient and well run distribution center is a balance of operating space, equipment, and management. But there are always strategies to reduce operating costs even further. One way is to invest in hardware, software and systems enhancements. Another is to look at a part of the operation and ask some basic questions. Let’s use packing as an example.
While most companies monitor their shipping costs and work with the various carriers to obtain the most favorable rates, they don’t look at the whole shipping process. For example, they tend to overlook packaging expenses, considering them a cost of doing business. A popular misconception is that since your product has to ship and you get a good discount on corrugated, you’ve already reduced your packaging costs. Yes, this does reduce your expense, but there is still some low hanging fruit available for the picking. Take a step back and look at your packaging operation and answer the following questions:
How many carton sizes are you using? Most operations can get away with three or four carton sizes and maybe as many as six. The number of cartons tends to "creep" upward as you get a new carton that is ¾" taller to accommodate a new product or to satisfy a packer’s request. These additional cartons cost money to buy and take up space in your racking system to store. Additionally, the special cartons end up being slow movers. If you need a different size carton, consider using an existing size and add a little more dunnage.
Are you using a non-standard size carton? Non-standard size cartons cost more than a standard size. There may be a die charge, set-up charge and minimum quantity run size. There may also be additional lead time if you run out unexpectedly and need some to make shipments. By using a standard size you will reduce costs and the quantity you will have to buy and keep on-hand. Let your supplier store your cartons.
Are you using a carton imprinted with your logo? All the previous arguments apply plus a few more. If it is not the final consumer packaging, you may be wasting your money. Who sees a shipping carton? The people working for your parcel carrier, your customers’ warehouse if you are B2B, or the end user if you are B2C. In any case the carton is either recycled or trashed. Finally, your logo advertises what’s in the box and may make it a higher profile target for theft.
Have you considered using mailers or envelopes in lieu of a carton? Look at your product; does all of it have to ship in corrugated? Mailers and envelopes cost less to buy than a corrugated carton and cost less to ship.
Are you over-packing items that could be considered self-shippers? There are legitimate reasons (such as security) why you may want to over-pack an item, but at a couple of bucks per line (labor and material), you want to make sure that there is a return on the expense. Another form of over-packing is to separate picks or orders by packing them in a carton and then packing those cartons in a single master carton. If there is a customer request or real reason to do this, then fine, go ahead with the practice. But there is a real cost to doing this; make sure you know what that level of service is costing and make sure you are getting paid to do it.
Are you using dunnage? What type and why? Most DCs use dunnage of some type and there are a lot of considerations in choosing the right type. Cost is not the most important. Dunnage fulfills several roles, including void fill, securing the contents, and protecting the contents during transport. One type of dunnage can’t do it all, and if it does, it won’t be cheap. Crinkled paper is a cost effective void fill, but if you are shipping automotive parts, it may become compressed during shipment and allow an expensive carburetor to bounce around and become damaged.
At the other end of the spectrum is expanding foam packing. It fills the void, secures, and protects the product during shipment. It is also one of the more costly solutions. If you use dunnage, determine what you want it to do for you and then select the type that meets your requirements. Having your merchandise arrive damage-free at a customer site eliminates claims and returns while increasing customer satisfaction.
Besides the cost of packing materials, you also need to look at the labor used in packing.
Do your packers have the tools they need to do their job? It sounds simple, but I’ve seen operations where packers were sharing tape guns and work tables. Make sure your packers can do their job without having to wait for a piece of equipment. Don’t make a packer leave the work area to get supplies or a piece of equipment.
Do your packers have the space they need to pack an order? If all a packer does is put the picked product in a box with a packing slip and tape the box shut, then they will need less space than a packer who has to do a 100% check on an order. Make sure your packers have an adequate work surface to perform the task you assign them. This includes having space for all the tools and supplies.
These are relatively basic ideas, but if you are trying to reduce expenses, they can deliver a quick return.
Don Kuzma is an industry analyst based in Cleveland who specializes in distribution center design and management. He can be reached at [email protected].