9 Key Factors in Managing Warehouse Operations


Warehouse operations involve a complex series of systems and processes combined with people and machinery acting in concert. To someone walking into a warehouse for the first time, it can seem either like organized chaos or an orchestrated symphony of coordinated movements, depending on your perspective.

In this article, we consider the 9 key factors that go into managing warehouse operations to provide greater insight into this fascinating area.


1. Inventory Receiving is the Starting Point

Receiving new inventory into the warehouse is either something that goes well or poorly. When new stock is incorrectly labeled and added as the wrong inventory, the consequences are dire.

An e-commerce site will show incorrect stock levels leading customers to believe they can place an order and the correct item will be shipped promptly. Either that’s later caught as an error at the picking stage, resulting in a canceled order, or it isn’t discovered until the customer opens the box.

To avoid these issues, many warehouse managers put their most detail-oriented people in charge of receiving new inventory. They understand that when this aspect of warehouse operations goes wrong, it’s all fruit of the poison tree from thereon.


2. Inventory Accuracy is Critical

Inventory accuracy – from mistaken shipments to errors in picking the wrong item off the shelf – can cost a company dearly.

While the cost to get the item returned and restocked can easily exceed $30-40, that’s not the only consequence. Trust in the company is reduced with customers disappointed and suffering additional delays until the correct item is in their hands.

Without effective systems and attention to detail with warehouse staff at every link in the chain, a greater number of mistakes creep into the operation. Pretty soon, it really is chaos when inventory accuracy begins to noticeably erode.


3. Warehouse Layout Efficiencies Save Time

The layout of the warehouse is key to a more efficient operation, but it also cuts down on delays and mistakes too.

For starters, the inbound goods and the shipments need to operate from different doors. Doing so ensures that the two do not get muddled together when the warehouse mostly deals with retail chains, rather than with consumers where the shipped packaging looks markedly different.

The most popular items ideally should be located nearest to the pickers to reduce transit time to put together a customer’s order. Unlike in a retail store, similar items and ones with an SKU that appears similar should not be stored near to each other. This avoids picking mistakes due to tiredness or inattention to detail. While an inexperienced warehouse manager may blame staff for picking errors, a sensible layout can do much to reduce its recurrence.


4. Watching the Shrinkage Rate to Reduce Losses

Shrinkage is goods that should be in the warehouse – they were scanned in – but are not on the shelf. Even with the benefit of management systems confirming the correct number, items are subsequently found to be missing.

Shrinkage can occur for several reasons:

  • Damaged goods are not being removed and marked appropriately.
  • Stolen property.
  • Wrongly shipped item due to a picking error.

It shouldn’t be automatically assumed that items are being stolen from the warehouse. With that said, the retail industry measured the average shrinkage rate in the National Retail Security Survey (2018), which came out at 1.33%. In the warehousing industry, it’s closer to 0.20% mainly due to the precise systems, controlled environment, and limitations on physical access to the inventory.

Monitor the shrinkage rate in the warehouse to ensure it doesn’t run unusually high. If it does, that may indicate a problem somewhere along the line.


5. Maintaining Fire Safety

Fire safety cannot be something that is only thought about in hindsight. The employer has a duty of care to every employee to ensure they stay safe and protected while working there. Also, visitors to the warehouse must be kept safe from harm too.

The importance of fire safety is something that every warehouse manager should pay attention to. Sadly, that’s not always the case, which is why reminders are especially important. Nevertheless, there are safety standards that must legally be adhered to.

Safety standards ensure that premises remain safe. Fire extinguishers appropriate for the materials stored in the warehouse, a functional overhead sprinkler system, emergency lighting, signs directing where to go in the event of a fire, and protective fire doors are all essential.


6. Using Reliable Warehouse Management Tools

Human error. Much as we like to believe we’re infallible, that’s just not the case. The longer the hours, and the fewer breaks, the greater the number of errors. Even a bad night’s sleep can cause someone to be more error-prone than normal. Good warehouse management tools aim to avoid accidental mistakes from creeping into the operation.


Radio Frequency Scanners Keep Track

Radiofrequency scanners are used as handheld tools so warehouse staff can find and pick products to ship out. Each warehouse tote has a scannable code. This confirms when they’ve found the correct one. Then the scanner provides information about where to locate the ordered item nearby.

Once directed to the correct place to pick the product, another scan takes place to confirm it. After all the items are in the picker’s tote, they rescan every item. This scan ensures not only that the right items were picked but in the proper quantities too.


Alerts When Something Goes Wrong

When a barcode is scanned but it’s not what’s been ordered, the RF scanner should alert the worker to this fact. It will also confirm the correct location in case the picker is in the wrong place in the warehouse.

The same systems are relied upon when the replenishment squad gets to work relocating inventory out of the backstock area to forward locations for picking. The location of each item is adjusted in the system to reflect its new position in the warehouse.


Picking Up on Errors

When mistakes are made, they can often be traced back to the individual employee based on data collected by warehouse management tools. This allows supervisors or managers to schedule additional training to clarify any confusion, re-confirm how warehouse systems work, and address any other issues causing a substantial number of human errors to happen.


7. Systems In-place to Handle Products without Barcodes

It sometimes happens that a product doesn’t have a barcode. This might be because one wasn’t ever produced – it could have been shipped from abroad where the same standards were not applied. Also, the barcode could have been ripped off the packaging during transit, been willfully removed, or defaced.

Warehouses must have systems in place to handle these kinds of inevitable situations. Where possible, looking up the product in the system to reproduce the right barcode is one solution. When there is no barcode, then it’s necessary at the very least to apply a barcode to the storage location. However, in a worst-case scenario, a temporary unique barcode can be used internally to ensure a previously non-barcoded product box is traceable within the warehouse.


8. Obsolescence to Track Products That Aren’t Shipping Out

Obsolescence is an area that is important on several levels.

No company wants to order products that sit on the shelf endlessly before shipping out to commercial or retail customers. Not only can the product be perishable in the case of food-related items, but with technology products, a 9-month-old laptop is no longer considered cutting-edge, requiring price reductions to clear out the inventory to make space for something new.

Beyond items becoming either unsellable or harder to sell at a discount, obsolescence after 90 days is a critical factor on the purchasing side too. The buyers need to know that an SKU isn’t selling well, to avoid restocking it at the same level – if at all. This avoids the problem worsening, potentially leading to either reduced earnings or creating substantial losses due to poor management of old inventory.


9. Timely Communication with Third-party Fulfillment Providers

Shipment notifications are necessary from third-party providers involved with fulfillment, to alert warehouse operations to large incoming goods deliveries.


Reorganizing the Space

Space may need to be made to fit the new inventory inside the warehouse. This could involve a reorganization ahead of time including a push to sell off old inventory that’s creating little profit and taking up too much room.


Changed Staffing Shifts

Additional shifts may be required to handle a large goods shipment arriving on a certain date. By knowing in advance what’s arriving, it allows for additional warehouse personnel to be made available.


Other Quirks Can Cause System Hiccups

Knowing about items that are completely new to warehouse staff allows them to prepare ahead of time. The new SKUs could be bulkier than usual or awkwardly sized. Reinforced or reconfigured storage areas might be required to accommodate them that can be set up before the shipment arrives.

Also, seemingly smaller issues like different quantities per box can confuse if the warehouse staff has been previously used to a similar product version with a different number of items per box.


Warehouse Management Systems Require Adjustment

A warehouse management system can be adjusted to account for all these variables to ensure smooth receiving when notified in advance. Therefore, communication both within the organization and between third-party suppliers and the company is paramount.

Ultimately, managing warehouse operations proficiently and well is far more complicated to get right than people realize. However, when using the best systems, adequate communications, and talented personnel, it’s possible to excel at it.


By Jessica Peters

Bio – Jessica Peters is a freelance writer from Melbourne who blogs about health and fitness. Jessica is an avid traveler and regularly crosses the globe to learn about other cultures while blogging from her laptop.

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