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How to reduce warehouse operations costs?

8 minute read
WMS platform development

Grow your gross margins by developing a custom WMS

Remember when your business fit into a small room with a few boxes? At that time, it was easy to process customer requests promptly and ship the orders in a defined time. An Excel form was enough for SKU management, and manual stock update was a normal practice in your startup. 

As the business grew, your need for warehouse space expanded, and new boxes popped up like mushrooms after the rain. Now, you have a large building with high ceilings, plenty of storage space, and a seemingly infinite number of packs. 

If, with all this growth, you have chaotic inventory management in place, warehouse management systems (WMS) software is what you need. Take a few minutes to see how WMS software can optimize your workflow and save you from unnecessary expenses. 

Warehouse management best practices

Warehouse management is a crucial part of the logistics system. It involves the competent usage of enterprise resources to quickly and efficiently process incoming and outgoing goods. Note that warehouse management and WMS software are not identical concepts. In fact, the WMS platform is a part of the warehouse management system because it automates and improves processes already established at the enterprise.

So, if you want to reduce warehouse operations costs, start optimizing processes within the organization. Here are the best practices to follow: 

Planned warehouse layout

Warehouse layout depends on the business specifics, area of the premises, and the number of staff. You need to organize the warehouse space so that there is enough area for storing, sorting, and packing inventory. Also, you need to plan enough room for personnel maneuvering and to set up an office-like zone where your staff can work on computers or laptops.

How to plan warehouse layout
Planning warehouse layout

Address storage system

You can use either static or dynamic address storage as a part of your warehouse management solution. 

A static address storage system provides a specific place for each product and is suitable for non-large businesses with moderate cargo flows. Such a system is applicable even in manual selection, where the staff can remember the placement of particular goods and retrieve them quickly when required. 

A dynamic address storage system assumes that all empty cells in the warehouse are filled with goods. It best suits organizations with an extensive product range, dynamic assortment, and batch accounting. Dynamic address storage is a more complex but more professional placement system. It requires specialized software and equipment to record and read data on the goods’ location.

Dynamic racking storage
Dynamic racking storage

Product preservation environment

Your warehouse must have a favorable environment to keep your products safe.

If, for example, you store food, you need to adjust the temperature to 5 degrees Celsius so that the products do not spoil and can reach the distributor in the proper condition.

If you work with clothes items, it is important that the air humidity does not exceed 50-70% and that the clothes are protected from direct sunlight.

For indoor plants, you will need to maintain  a microclimate with a constant temperature of 18-20 degrees Celsius, otherwise, the plants will wither.

To set up appropriate conditions in the warehouse, you need to buy specialized equipment and adjust powerful climate tracking systems. You will also need to contact vendors who can set up a warehouse control system that will alert you if storage conditions go beyond normal limits.

Logistics audit

If you need efficient innovations in your warehouse, it is important to analyze the current logistics system and find management solutions that best suit your business needs. You may want to attract logistics consultants to help you audit your storage system if you don’t have appropriate expertise in-house. When examining current business processes make sure to assess:

  • specifics of goods
  • warehouse spaces
  • warehouse location
  • warehouse build materials
  • security system
  • available shipping providers
  • business environment
  • customer expectations
  • human resources

After that, select a set of activities that will provide a real result in practice, without going beyond the project budget.

Example of logistic audit report
Example of ABC analysis of logistics system as a part of logistics audit

Business-tied WMS

In a highly competitive environment, efficient inventory management is impossible without a modern WMS. Currently, there are many warehouse automation solutions from simple apps to complex WMS systems. You should choose one based on the results of the logistics audit. If there is no appropriate WMS solution or if such a solution is too expensive, you can invest in custom WMS software development and get a solution 100% tied to your business needs.

What risks to take into account while implementing a WMS

WMS implementation is a big investment but it is also a proven way to reduce warehouse operations costs in the long term. There are many factors to consider when deciding to create a WMS. If you assess the risks beforehand, you can steer the development process in the right direction, resulting in an efficient software product. Here is what you should consider before launching the WMS project.

Unjustified expectations

The biggest risk involved in implementing a WMS is that the outcome is not what you expected. Unjustified expectations can be related to the WMS functionality, performance, third-party integrations, and more. However, if you conduct in-depth business analysis and thorough project planning, you will get a high-quality product fully tied to your business needs.

Long development time

It may take several months to develop a WMS MVP. You should then receive a system with a minimum feature set that covers your basic enterprise needs. Your software should have the capacity to be extended with more advanced functionality or have the existing features adjusted, as per your needs. In any case, you need to have realistic expectations, as custom development of a fully functional program will take time. 

Insufficient WMS capacity

If you’re expecting rapid growth of your business you need to make sure your WMS solutions can handle the increased volume of operations, data, and users. 

The best way to make a scalable WMS is to develop it in the cloud. Providers like AWS and Microsoft Azure offer a wide range of IT tools for rapid implementation, testing, and deployment, so you can quickly create full-fledged software at an affordable price.

Inappropriate staff composition

WMS can automate many tasks, so you must have the right people in place to handle the new responsibilities. You will have to approve staff roles in advance and prepare a training program to teach the personnel to use the WMS system. Having studied all the features of the new software, your team will be able to automate warehouse processes and improve inventory operations within your organization.

Security concerns

If you don’t have an in-house IT department, you will likely outsource software development to third-party domain experts. On the one hand, this will allow you to quickly access the necessary development expertise, on the other hand, you will need to ensure that no personal data leaks to unauthorized persons.

To resolve security concerns, make sure to sign a non-disclosure agreement with the contractor engaged to implement the WMS software. Also, ensure that the development contract defines you as a sole software owner and obliges the contractor to hand over the source code to you upon the project completion.

WMS development risks
Custom WMS risks

Custom WMS development and 3rd party integrations

Custom WMS is a warehouse management system that offers a set of tools for automating and digitizing processes in your organization. In most enterprises, WMS exists as part of the corporate software system, so during development, you need to consider how it will communicate with other corporate modules in your enterprise. 

Also, a custom WMS may need to connect with external services, such as shipping platforms, payment gateways, IoT tools, or route planning systems. In view of this, particular attention should be given to the development of an Application Programming Interface (API). A handy custom API will facilitate the communication between your system and third-party resources and enrich your WMS with useful features without extra costs.

Finding the right WMS development partner

Building WMS control software may seem like a daunting task until you meet the right development provider. If you are not sure where to find a reliable outsourcing company, here is the search algorithm to follow:

  1. Ask colleagues and friends. Recommendations are the best way to choose a restaurant or hotel, and the same applies to choosing an outsourcer. So, start by asking colleagues and friends if they can recommend someone and make a list of potential partners.
  1. Learn company reputation. Visit platforms like Clutch, GoodFirms, or just google, and read what partners and employees think of the company of your choice.
  1. Filter out unsuitable candidates. Shorten the list of applicants by evaluating them according to:
  • technical expertise
  • related experience
  • technologies adoption
  • portfolio of similar cases
  1. Book a call. Discuss project details with the company representative and ask for a project estimate.
  2. Sign a software development contract. If you and your partner have the same work attitude and project expectations, sign a contract and get your dream WMS done.
September 23, 2022
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