5 ways to reduce warehouse costs and boost profitability

Warehouse costs can differ significantly and be influenced by location, size, product portfolio, and supply chain requirements. Renting warehouse space makes up a significant portion of total warehouse expenses, with upkeep being the equivalent for businesses that own their warehouse.

In the UK, the rent for warehouse space generally ranges from £5 to £9 per square metre, which could be quadruple in prime locations like London.  Total prime warehousing property costs, comprising rents, service charges, and taxes, grew by 10.1% globally in the 12 months to June 2023 and will continue to do so.

Controlling warehouse costs is crucial for maintaining profitability in industries that involve storage and order fulfilment. Rising expenses, such as labour, real estate, utilities, and operations, can significantly impact the bottom line if not managed effectively.

Why is warehouse cost reduction necessary?

Optimising warehouse costs impacts profitability and competitiveness directly by reducing overall operational expenses. This, in turn, allows businesses to offer more competitive pricing to customers and improve efficiency and productivity, leading to faster order fulfilment and better customer service.

Cost reduction in warehouse operations facilitates scalability and adaptability to changing market demands and business growth, promoting a lean supply chain with minimised waste and maximised resource utilisation. Moreover, it enables the reinvestment of cost savings into growth, innovation, or other business areas.

Five practical warehouse cost reduction ideas

Warehousing expenses constitute a significant portion of operational costs for many businesses, especially manufacturing, distribution, or retail. Therefore, running a well-optimised warehouse can help maintain high productivity levels, minimise errors, and ensure client satisfaction.

While various methods exist to achieve such optimisation, installing an automated storage and retrieval system (ASRS) like AutoStore is a popular and effective solution. Here’s why:

1. Maximise storage density and space utilisation

An AutoStore solution uses a high-density aluminium grid structure with stacked bins or containers that can extend up to the ceiling height, allowing for maximum utilisation of the available vertical space within the facility. With this storage-dense technology, businesses can decrease their required warehouse footprint and associated costs like rent, taxes, and utilities.

To further optimise storage capacity, it’s crucial to consider product slotting and layout configurations that promote dense and efficient storage arrangements.

2. Automate labour-intensive processes

Warehouses can significantly reduce labour costs by automating storage and retrieval. Integrating automated systems for various other processes, including picking, packing, and shipping, can further streamline warehouse operations.

Leveraging intelligent order picking technologies, such as eOperator from Element Logic, can also enhance efficiency by enabling hands-free operations while minimising the need for manual material handling and the associated labour expenses.

3. Enhance inventory management and order processing

To fully leverage AutoStore technology, implement advanced software such as Element Logic’s eManager and integrate it with your existing warehouse management system (WMS) to provide real-time inventory visibility and tracking. This can help optimise stock levels using demand forecasting and predictive analytics, which inform stocking decisions.

Additionally, prioritising orders and managing fulfilment waves strategically will contribute to achieving maximum efficiency in operations. Intelligent software can reduce inventory carrying costs and minimise the risks of obsolescence by implementing accurate cycle counting methods.

Furthermore, improving order accuracy will help minimise the cost associated with returns and reverse logistics, thereby streamlining the overall supply chain process.

4. Improve energy efficiency and sustainability

An ASRS like AutoStore requires less lighting, heating, and cooling, significantly decreasing energy consumption – and cost. AutoStore robots themselves are also designed to use energy as efficiently as possible; in fact, ten AutoStore robots use the same level of energy as one vacuum cleaner and they can easily run on solar-generated energy.

In addition:

• Energy-efficient technologies such as LED lighting, enhanced insulation, and advanced HVAC systems further leverage savings and efficiency.
• Integrating motion sensors and automated lighting controls can significantly minimise energy waste by ensuring that lights are used only when necessary.
• Embracing sustainable warehouse practices, including recycling, reducing waste, and employing eco-friendly packaging options, is crucial in promoting environmental responsibility.
• Implementing renewable energy sources like solar panels can also lead to substantial long-term savings on utility expenses.

5. Streamline workforce management

By introducing warehouse automation systems, businesses can redeploy their employees to more value-added tasks, increasing efficiency. However, it’s critical to offer extensive training on ASRS like AutoStore to ensure proficiency across the workforce – adopting flexible scheduling and cross-training is an excellent approach to providing operational versatility.

Furthermore, introducing incentive and recognition programmes can boost productivity and retention, while prioritising ergonomics and safety will minimise workplace injuries and their associated costs.

Why an AutoStore system is one of the most effective ways to reduce warehouse costs

An AutoStore system maximises vertical space utilisation by incorporating a compact, high-density storage grid with a robotic retrieval system. Warehouse owners can significantly reduce labour costs by automating storage, retrieval, and other material handling processes. This system also boosts picking accuracy and efficiency, minimising errors, returns, and the related expenses.

AutoStore’s robotic, cube-based storage reduces the need for a large warehouse footprint, lowering overhead costs such as rent, utilities, and maintenance. The modular components can be adapted to fit virtually any floor shape or plan (including micro fulfilment centres), even around corners and other obstacles, meaning it can meet changing business needs without major renovations.

To top it off, Element Logic’s advanced software for AutoStore enables cost-efficient inventory management, order processing, and resource allocation. It also seamlessly integrates with existing operations and equipment, ensuring a smooth transition to automation.

Think about current and future needs

Making warehouse cost savings is essential for sustained profitability and maintaining a competitive edge.

Are you ready to minimise your current cost sand maximise your future profitability?

Speak to one of our experts about implementing an ultra-efficient AutoStore solution today.

Written by Gavin Harrison, UK Sales Director, Element Logic