5 Warehousing Strategies That Can Increase Business Profits

With ecommerce rapidly changing the way people and businesses buy and receive goods, you may be struggling to update your own operations. In that case, implementing modern warehouse strategies for your business should be a priority. Ensuring that you’re using the right strategy can be critical to success. 

Key Takeaways:

• Practicing lean inventory will reduce the amount of warehouse space needed and can be implemented through JIT fulfillment practices. 
• Investing in automated processes can speed up warehouse activities, cut down on human error, and even protect employees, reducing liabilities a business could be responsible for.
• Centralizing your warehouse operations consolidates expenses and can make KPIs easier to track when implementing changes. 
• Demand planning will help you achieve lean inventory goals while still ensuring that you avoid stockout situations and keep clients happy. 
• 3PL outsourcing will ensure that you can implement multiple strategies at once without the expense of overhauling existing infrastructure, while also tracking KPIs. 

See how the right logistics strategy can make your warehouse management system more profitable.  

What is a Warehouse Strategy? 

Any business that maintains inventory for the purpose of customer fulfillment needs to consider the logistics surrounding how to receive it, store it, and ship it out to customers. Warehouse strategies are methods that optimize logistics to best utilize space, resources, and time. 

The goal of any strategy is to streamline and optimize your logistics and fulfillment as much as possible. Successful implementation of a strategy will depend on how well you understand each process and how it works within your business model.

5 Proven Strategies in Warehousing

Improving your warehouse logistics means taking into consideration customer demands, expanding delivery areas, and supply chain disruptions. Add in the complications of a transport industry facing delays due to a shortage of workers, and strategic warehousing becomes more important than ever. 

I’ve put together a list of five strategies that have helped businesses streamline operations for better financial outcomes. We’ll review the following with each:

• What the process is
• How it improves operations
• Who can most benefit

Let’s get started. 

1. Practicing Lean Inventory

The goal of lean inventory practices is to keep only essential materials on hand and thus reduce the amount of warehouse space needed. There are a few different ways to achieve this, but they all start with having accurate sales tracking and the right warehouse management system (WMS).

Practices that help companies succeed on a lean inventory include: 

• JIT (Just-in-time) Management: The focus is on avoiding dead stock by only basing inventory orders on real-time tracking of production schedules. It allows for ordering on an as-needed basis rather than risking overstock. 
• FIFO: First In, First Out fulfillment practices ensure that older merchandise goes out first and makes it easier to identify which SKUs may be piling up.  
• Routine Inventory Audits: These should be used together with sales data and demand planning to quickly find what is and isn’t turning over at the current reorder rates.

A company that effectively follows these practices and achieves lean inventory improves their operations in the following ways: 

• Reduced storage space from having less inventory 
• Removal of slow selling results in higher turnover rates
• Better cash flow with money not tied to excess inventory

Business in the following markets may benefit the most from this strategy:

• Seasonal items: The use of previous sales records and trends can help them avoid over-ordering. 
• Perishable goods: Minimal items with high turnover rates minimize the risk of good loss to spoil or expiry dates. 
• Small-to-Medium Businesses (SMBs): These won’t have to rely on large warehouse operations, so they gain a competitive edge. 

Related: FIFO Procedures for Warehousing

2. Automated Processes

Advances in technology have made implementing automated processes easier and more cost-effective. As a strategy, I’m going to focus on systems that can identify and organize data on incoming and outgoing orders with little human input.

• Automatic Identification and Data Capture (AIDC): This technology uses bar code scanning and location tracking services so you know where items are and how much is available.  

• Warehouse Management Software: Coordinates with order management and other systems to streamline any automated features being implemented.
• ABC Analysis: The ability to categorize your items by how much they impact inventory costs in general (purchasing, storing, and delivery all factor in). 
• AI and Robotics: The right tools and software can now handle putaway, pick and pack, and even packing and labeling

Implementing automated processes can come at a high initial cost (especially AI and robotic systems). However, they help business profit in the following ways once they’re in place: 

• Enhanced accuracy reduces ordering and fulfillment mistakes.
• The need for fewer people reduces overhead labor costs.
• Increased efficiency results from a better use of space and labor. 

Of course, automated systems still need human oversight. Additionally, the cost of implementing automation as a strategy has fallen, but still represents a significant financial investment.  Taking this into consideration, businesses that would most benefit from this strategy may include: 

• High-Volume Ecommerce Warehouses: Automation allows for easier tracking and faster, more efficient order fulfillment for complex and frequent orders. 
• B2B Operations: Bulk orders are more easily prepared and accurate inventory counts reduce the risk of fulfillment mistakes for complex orders. 
• Cold storage/Hazardous Materials: Robotic systems in these cases can protect people from potentially harmful environments, reducing liabilities. 

Related: Types of Warehouse Management Systems

3. Centralization

Today, improved technology has brought back the practice of centralized warehouses. Keeping your inventory at a central warehouse, perhaps even two or three, near major highways can give you access to the greatest number of clients at the lowest cost. 

In centralization, you can still take advantage of local fulfillment practices by using local distribution hubs that use cross docking. 

To implement this as a strategy, consider the following:

• A review of current costs, common shipping routes, and supplier locations
• Ease of access to a central location as well as potential distribution facilities
• Access to data systems where key performance indicators (KPIs) can be monitored

The most efficient way for most businesses to practice centralization is through a third party logistics (3PL) provider who already owns and operates warehouses in keep positions throughout the United States. We’ll go more into 3PLs later, but for now, I’ll point out the way their centralized locations can benefit your business: 

• Allows you to purchase and store in bulk at a single location, allowing you to benefit from bulk and wholesale pricing.
• Experience improved inventory management by having suppliers ship to a single location.
• A single standardized process allows for consistent order fulfillment and tracking, which can improve customer service.
• Centralized facilities allow for greater scalability, allowing your business to expand its inventory to meet growing demand with greater ease.

Spreading your inventory across too many locations will raise your overhead, despite gaining you benefits like shorter fulfillment times. In many cases, the exchange just isn’t worth the return on investment. 

Related: Hub & Spoke Logistics: Distribution Models of the Future

With the right planning and marketing, most types of businesses can benefit from practicing centralization, including:

• B2B Distributors: Often requiring bulk shipments, these can benefit from proximity to main import hubs as central locations, allowing them to receive and ship out orders. 
• Retailers With A Broad Customer Base: Fulfilling nationally is simpler when you centralize distribution at facilities near major shipping lanes that provide access to population centers. 
• Companies With Specialized Products: Singular locations improve security for the warehousing and fulfillment of products that are high-value/high-risk, including pharmaceuticals and certain electronics. 

4. Demand Planning

As a strategy, demand planning goes hand in glove with lean inventory practices. The goal of demand planning is to accurately predict future customer needs and have enough inventory on hand to meet that demand with minimal surplus. 

Like lean inventory, the goal with demand planning is to reduce your warehouse storage costs by avoiding excess inventory that takes up space and ties up capital. Of course, predicting the future is hardly an easy venture, or else everyone would be doing it. 

With the right software and cooperation among the different aspects of your business, a successful demand planning strategy improves your business in the following ways:

• Avoid excess inventory to minimize carrying costs and increase available capital.
• Planning ahead to reduce supply chain disruptions due to seasonal changes or market shifts.
• Improved communication between business units, particularly sales and marketing teams, for better outcomes. 

As a warehousing strategy, demand planning can best be utilized by businesses that already have an established sales history and focus on limited offerings that are easier to track. Business like this may include:

• Essential item sales: Companies focused on selling pharmaceuticals, medical devices, office supplies may have occasional spikes, but operate on mostly consistent demand. 
• SMBs with Centralized Warehousing: These already have their inventory in one place, which makes setting up tracking and analytics for demand planning much easier. 
• Established Retailers/Wholesalers: The more historical data a company has, the more accurate its predictions tend to be. Companies with well-established client bases can better see trends and patterns.  

5. 3PL Outsourcing 

Owning and running a private warehouse for your business is a huge expense, whether you’re building from the ground up or utilizing rented space.

Between meeting expected customer services and basic warehouse management, it can easily become the most consuming part of your business in terms of time and money.  

While outsourcing to a 3PL as a warehousing strategy comes with significant costs, it pays out in the long term by allowing experts to manage the complex and sophisticated systems that make implementing other strategies possible. 

Do your research on the best ones for you, of course. After that, keep up a steady relationship with your warehouse partner to make future business decisions easier. 

There are a few different services 3PLs can offer: 

• Fulfillment Warehouse Services: This is a full service type of offer, where the 3PL manages all of your inventory needs, both for inbound and outbound logistics. Many will provide you with customized options and software, so you can even share tracking information with clients under your own name.  
• On-Demand Warehousing:  This warehouse set up is more of an à la carte system. In many ways, it’s offered as a pay-as-you-go system that accommodates rapid demand changes. If you don’t use an offered service or storage space, you don’t pay for it. 

These are two of the most common ways to outsource, but within these there are even more options. As a strategy, outsourcing helps your business meet the following needs:

• Offering tailored logistics, including returns, pick and pack, and kitting services.
• Access to specialized professionals allows business owners to focus on market expansion and product development.
• Better management of seasonal peaks through easy scalability in both storage and services. 

While they are useful in various markets, they are especially beneficial to businesses such as:

• Growing Start-Ups: Companies that are quickly scaling up benefit from a system that is flexible, allowing for quickly expanded inventory needs and fulfillment services.
• International Importers: 3PLs can partner with customs brokerage teams to help businesses obtain overseas inventory while also providing warehousing near major ports for easy inbound services. 
• Ecommerce Businesses: Outsourcing allows ecommerce businesses to minimize overhead costs, especially for digitally native companies that like to stay flexible in their offerings. 

Related: 5 Reasons You Should Outsource Your Oder Fulfillment to a 3PL

How Will I Know My Strategy is Working?

When your warehousing and fulfillment is running smoothly, you’ll notice positive feedback in your customer experiences, as well as an improved profit margin. 

To understand how your strategies are contributing to your success, here are benchmarks you may want to track: 

• Customer Reviews: It takes either a really good experience or a really bad one for customers to leave reviews. Learn from both what works and what doesn’t. 
• Rate of Returns: If you are experiencing higher than normal returns, do some investigating. Is it the product itself? Was the order wrong? If it’s the second one, it could be a sign of trouble somewhere in the fulfillment process. 
• Shipping costs: Sudden spikes in shipping costs could just be economics, or they might show that resources aren’t getting used right. 
• Inventory Count: Goods that aren’t selling are costing you money. Make sure your inventory management system is on track and not creating dead weight. 

Stay on top of those metrics and you should be able to fine-tune your warehousing strategies to changing needs and world circumstances. 

Get Warehousing Solutions To Fit Your Business

Fulfillment and Distribution has been managing warehouses for decades. If you are looking for strategic warehousing solutions for your business, go no further. 

We have warehouses in major cities across the United States, including:

• Los Angeles, CA
• Atlanta, GA
• Ocala, FL

Our warehouse management systems allow you to track in and outgoing inventory in real-time. Manage your inventory levels and even track deliveries from warehouse to customer. 
Request a services quote online today or call us directly at (866) 989-3082. Partner with us and know you will be working with dedicated staff and state-of-the-art security to keep things running smooth and secure. dedicated staff and state-of-the-art security to keep things running smooth and secure.