You may not realize it. But if you purchased or received a new electronic gadget this past holiday season only to discover that it didn’t work as well as the old one, you learned an important warehousing lesson for these times: Some upgrades are truly worth the money. Others are merely new, rather than improved.
As our country heads into economic recovery, many companies may be willing to begin funding more capital improvements again, including some that involve their distribution centers. However, most won’t want to designate these funds lightly, and they’ll be watching closely to make sure any dollars they spend actually yield tangible results.
With that in mind, here are nine warehousing upgrades that will truly – and quickly – deliver an ROI.
Energy-Efficient Lighting
When it comes to DC lighting, older usually isn’t better. The metal halide lights commonly installed in warehouses as recently as five to 10 years ago consume considerably more energy – and can cause your company to accrue significantly higher electric bills – than the more efficient fluorescent lighting technologies available today.
In fact some statistics say that converting to newer, “green” lighting could reduce a building’s light-related electricity requirements by as much as 70%.
A lighting conversion also could earn your company tax breaks because some local governments and utilities offer incentives when buildings use more sustainable materials. Plus, your company could save the expense of related carbon offset purchases.
Industrial Equipment Impact Switches
Forklifts do a great deal of the heavy lifting in distribution centers. However, they also cause a great deal of the product and property damage because it’s all too easy for their operators to inadvertently hit or bump into things if they’re not properly trained and supervised. In fact, these small collisions could cost a company thousands of dollars per facility every year.
To reduce these incidents, consider investing in impact shock switches for your industrial equipment. These devices are designed to switch a vehicle off any time there’s an impact. As a result, managers and supervisors can immediately assess the damage, investigate the incident and take immediate corrective measures as appropriate.
Although the up-front expense of these devices is approximately $500 per vehicle, the additional accountability they provide and their effect on reducing accidents can be substantial. For example, at one of our facilities, a $7,500 investment in impact switches resulted in $25,000 fewer lift truck maintenance and building and repair expenses within two years. And that doesn’t even begin to factor in the impact on safety and reduced worker’s compensation expenses.
Fast-Charge Technology
Many forklifts now run on batteries. But unfortunately, these batteries usually have an operating life (six to eight hours) that doesn’t last through multiple shifts, and it takes a lot of time and effort to recharge them.
As a result, most companies must invest in two batteries per forklift – and build time in their operators’ day to drive to a battery changing room and have the battery changed out.
But now, fast-charge technologies are available. These technologies allow companies to recharge a battery approximately four times faster – in about 30 minutes – than other charge technologies, which means companies can schedule recharges during operator breaks, lunches or shift changes with little to no loss in productivity.
Companies that employ fast-charge no longer have to purchase a second battery for each forklift, which is a potential savings of $1,000 to several thousand dollars per battery. They also don’t have to pay for a battery changing room, the personnel trained to change the batteries or a battery change machine.
Fast-charge battery advocates say the technology could pay for itself within one to two years and help your facility achieve recharge savings of up to 50% on a go-forward basis.
Snowplows
Although this particular recommendation is quite literally outside the box, bear in mind that a facility’s efficiency depends on traffic flowing smoothly -- which can only happen if its truck yard and loading dock areas are free of snow.
If your company operates a facility someplace like Chicago, where record snowfalls are common, and it’s paying to have that snow cleared by an outside company several times a year, the annual cost could quickly and easily add up to the equivalent of what it would take to buy your own truck and snowplow combination (about $30,000). It may make considerably more financial sense to invest in one of your own.
Baling Machines
A distribution center can easily generate tens of thousands of pounds worth of waste per year thanks to the shrink wrap and corrugated cardboard it removes from incoming shipments and throws away. And in some markets, that can add up to approximately $185 per ton for haul-away and disposal.
Your company can eliminate this wasteful practice and all of the related expenses by using baling machines and selling the baled material to recycling companies. Some recycling companies will even donate the use of a baler in exchange for the materials.
One of our facilities in the Northeast has already managed to eliminate 40,000 tons of plastic waste – a savings of $4,000 – and eight tons of cardboard waste via this tactic. It also reports that the baled materials occupy less space and make less of a mess, which has boded well for its space utilization.
Labor Management Systems
Warehouse labor management systems are not inexpensive, especially when you factor in the cost of hardware, software, licenses and implementation services.
However, neither is the cost of labor, which is the single largest component of most warehouses’ expense. A robust labor management system enables your company to take a good, hard look at every functional task in a facility – receiving, put-away, processing and value-adding activities – and to examine it at granular level. Just as important, it can help you enhance individual accountability for managers, supervisors and floor associates.
As a result, you can isolate and correct the problem areas where productivity issues decline, evaluate how certain activities are being executed and know where to better focus your staffing, training and other resources.
Bear in mind that it may take longer to see an ROI for these systems than it will for some of the other upgrades mentioned. In fact, a year to a year and a half is a reasonable expectation. However, the potential payoffs are also greater.
Labor-Saving Devices
While we’re on the subject of warehouse labor and its high expense, it’s important to note that some forms of equipment and automation offer highly reliable – and ultimately less expensive – alternatives.
One good example of such automation is a layer-picking device, which can sometimes double or triple your facility’s picking productivity in locations that use a great deal of case picking. In a facility with sizable volumes, this device, which picks a whole layer of cases at a time, could easily pay for itself within a year.
Other economical automation examples include a Thermo-shrink machine and an auto-labeling machine. One of our operations purchased the former for $13,000 and expects to save $142,000 in reduced labor costs annually; it’s also realized $21,000 in reduced annual labor costs after purchasing the latter for $6,300.
Better Space Utilization Tools
Space is the second-largest component of warehousing cost. Any tool your company can use to optimize your use of existing facilities while delaying or eliminating the need to use overflow space at others is usually money well-spent.
For example, one of our food and grocery facilities found 7,500 additional pallet storage positions simply by installing additional racking. Some of our others freed up space by going with a Very Narrow Aisle configuration.
And many of our facilities have streamlined their physical operations by making use of Lean training and tools to re-evaluate their warehouse layouts. In fact, one of our successful Lean warehousing achievements to date comes from a facility whose Lean project inspired it to pursue proactive replenishment for the forward pick areas, take advantage of double stacking on the top level of racks and use dock space in front of unused doors. Ultimately those efforts helped that facility’s client shave $1 million off its warehousing costs.
An Improved Safety Push
Safety is not just the most important aspect of running a warehouse; it also pays. Most warehouses have a safety program or safety committee, even if it’s only to comply with OSHA regulations.
However many logistics professionals – and their companies – still mistakenly think of logistics safety programs in terms of what they’re spending instead of what they’re saving: lives, pain, product damage, property damage, extra insurance, legal liability and OSHA fines.
If your company is one of them, here are just a few financial reasons why you might want to consider a safety upgrade in the form of a full-time safety professional or a more concerted safety program.
First, according to data from the Workers Compensation Task Force, it turns out that your payment for workers’ comp claims might represent as little as 20% of what those claims-related injuries actually cost your company. In a survey conducted by workers’ comp insurer Liberty Mutual, nearly 40% of respondents reported that for each dollar in direct costs they spent on injuries, they spent anywhere from $3 to $5 on indirect costs such as lost productivity and time spent training a replacement.
A lack of logistics safety also puts more pressure on your company as a whole: If you have a profit margin of just one percent, you’ll need to earn an extra $100,000 in revenue to offset every $1,000 workers comp injury your employees incur.
The Bottom Line
These nine warehouse upgrades are by no means the only fiscally fit uses of any dollars you receive for warehousing in 2011. Nor are they the only ones to consider making to your supply chain as a whole should you be fortunate enough to receive additional logistics funding.
However if the axiom that you have to spend money to make money holds true, they should do a good job of demonstrating to your company that when it comes to warehousing efficiency, you truly won’t take any funds you receive lightly -- and that when you say warehousing upgrade, you don’t just mean “new;” you mean “improved.”
David Frentzel is Vice President Of Global Contract Logistics, APL Logistics, one of the world’s largest providers of warehousing and other supply chain management services. It operates distribution centers in more than 50 countries. Visit www.apllogistics.com for more information.
As our country heads into economic recovery, many companies may be willing to begin funding more capital improvements again, including some that involve their distribution centers. However, most won’t want to designate these funds lightly, and they’ll be watching closely to make sure any dollars they spend actually yield tangible results.
With that in mind, here are nine warehousing upgrades that will truly – and quickly – deliver an ROI.
Energy-Efficient Lighting
When it comes to DC lighting, older usually isn’t better. The metal halide lights commonly installed in warehouses as recently as five to 10 years ago consume considerably more energy – and can cause your company to accrue significantly higher electric bills – than the more efficient fluorescent lighting technologies available today.
In fact some statistics say that converting to newer, “green” lighting could reduce a building’s light-related electricity requirements by as much as 70%.
A lighting conversion also could earn your company tax breaks because some local governments and utilities offer incentives when buildings use more sustainable materials. Plus, your company could save the expense of related carbon offset purchases.
Industrial Equipment Impact Switches
Forklifts do a great deal of the heavy lifting in distribution centers. However, they also cause a great deal of the product and property damage because it’s all too easy for their operators to inadvertently hit or bump into things if they’re not properly trained and supervised. In fact, these small collisions could cost a company thousands of dollars per facility every year.
To reduce these incidents, consider investing in impact shock switches for your industrial equipment. These devices are designed to switch a vehicle off any time there’s an impact. As a result, managers and supervisors can immediately assess the damage, investigate the incident and take immediate corrective measures as appropriate.
Although the up-front expense of these devices is approximately $500 per vehicle, the additional accountability they provide and their effect on reducing accidents can be substantial. For example, at one of our facilities, a $7,500 investment in impact switches resulted in $25,000 fewer lift truck maintenance and building and repair expenses within two years. And that doesn’t even begin to factor in the impact on safety and reduced worker’s compensation expenses.
Fast-Charge Technology
Many forklifts now run on batteries. But unfortunately, these batteries usually have an operating life (six to eight hours) that doesn’t last through multiple shifts, and it takes a lot of time and effort to recharge them.
As a result, most companies must invest in two batteries per forklift – and build time in their operators’ day to drive to a battery changing room and have the battery changed out.
But now, fast-charge technologies are available. These technologies allow companies to recharge a battery approximately four times faster – in about 30 minutes – than other charge technologies, which means companies can schedule recharges during operator breaks, lunches or shift changes with little to no loss in productivity.
Companies that employ fast-charge no longer have to purchase a second battery for each forklift, which is a potential savings of $1,000 to several thousand dollars per battery. They also don’t have to pay for a battery changing room, the personnel trained to change the batteries or a battery change machine.
Fast-charge battery advocates say the technology could pay for itself within one to two years and help your facility achieve recharge savings of up to 50% on a go-forward basis.
Snowplows
Although this particular recommendation is quite literally outside the box, bear in mind that a facility’s efficiency depends on traffic flowing smoothly -- which can only happen if its truck yard and loading dock areas are free of snow.
If your company operates a facility someplace like Chicago, where record snowfalls are common, and it’s paying to have that snow cleared by an outside company several times a year, the annual cost could quickly and easily add up to the equivalent of what it would take to buy your own truck and snowplow combination (about $30,000). It may make considerably more financial sense to invest in one of your own.
Baling Machines
A distribution center can easily generate tens of thousands of pounds worth of waste per year thanks to the shrink wrap and corrugated cardboard it removes from incoming shipments and throws away. And in some markets, that can add up to approximately $185 per ton for haul-away and disposal.
Your company can eliminate this wasteful practice and all of the related expenses by using baling machines and selling the baled material to recycling companies. Some recycling companies will even donate the use of a baler in exchange for the materials.
One of our facilities in the Northeast has already managed to eliminate 40,000 tons of plastic waste – a savings of $4,000 – and eight tons of cardboard waste via this tactic. It also reports that the baled materials occupy less space and make less of a mess, which has boded well for its space utilization.
Labor Management Systems
Warehouse labor management systems are not inexpensive, especially when you factor in the cost of hardware, software, licenses and implementation services.
However, neither is the cost of labor, which is the single largest component of most warehouses’ expense. A robust labor management system enables your company to take a good, hard look at every functional task in a facility – receiving, put-away, processing and value-adding activities – and to examine it at granular level. Just as important, it can help you enhance individual accountability for managers, supervisors and floor associates.
As a result, you can isolate and correct the problem areas where productivity issues decline, evaluate how certain activities are being executed and know where to better focus your staffing, training and other resources.
Bear in mind that it may take longer to see an ROI for these systems than it will for some of the other upgrades mentioned. In fact, a year to a year and a half is a reasonable expectation. However, the potential payoffs are also greater.
Labor-Saving Devices
While we’re on the subject of warehouse labor and its high expense, it’s important to note that some forms of equipment and automation offer highly reliable – and ultimately less expensive – alternatives.
One good example of such automation is a layer-picking device, which can sometimes double or triple your facility’s picking productivity in locations that use a great deal of case picking. In a facility with sizable volumes, this device, which picks a whole layer of cases at a time, could easily pay for itself within a year.
Other economical automation examples include a Thermo-shrink machine and an auto-labeling machine. One of our operations purchased the former for $13,000 and expects to save $142,000 in reduced labor costs annually; it’s also realized $21,000 in reduced annual labor costs after purchasing the latter for $6,300.
Better Space Utilization Tools
Space is the second-largest component of warehousing cost. Any tool your company can use to optimize your use of existing facilities while delaying or eliminating the need to use overflow space at others is usually money well-spent.
For example, one of our food and grocery facilities found 7,500 additional pallet storage positions simply by installing additional racking. Some of our others freed up space by going with a Very Narrow Aisle configuration.
And many of our facilities have streamlined their physical operations by making use of Lean training and tools to re-evaluate their warehouse layouts. In fact, one of our successful Lean warehousing achievements to date comes from a facility whose Lean project inspired it to pursue proactive replenishment for the forward pick areas, take advantage of double stacking on the top level of racks and use dock space in front of unused doors. Ultimately those efforts helped that facility’s client shave $1 million off its warehousing costs.
An Improved Safety Push
Safety is not just the most important aspect of running a warehouse; it also pays. Most warehouses have a safety program or safety committee, even if it’s only to comply with OSHA regulations.
However many logistics professionals – and their companies – still mistakenly think of logistics safety programs in terms of what they’re spending instead of what they’re saving: lives, pain, product damage, property damage, extra insurance, legal liability and OSHA fines.
If your company is one of them, here are just a few financial reasons why you might want to consider a safety upgrade in the form of a full-time safety professional or a more concerted safety program.
First, according to data from the Workers Compensation Task Force, it turns out that your payment for workers’ comp claims might represent as little as 20% of what those claims-related injuries actually cost your company. In a survey conducted by workers’ comp insurer Liberty Mutual, nearly 40% of respondents reported that for each dollar in direct costs they spent on injuries, they spent anywhere from $3 to $5 on indirect costs such as lost productivity and time spent training a replacement.
A lack of logistics safety also puts more pressure on your company as a whole: If you have a profit margin of just one percent, you’ll need to earn an extra $100,000 in revenue to offset every $1,000 workers comp injury your employees incur.
The Bottom Line
These nine warehouse upgrades are by no means the only fiscally fit uses of any dollars you receive for warehousing in 2011. Nor are they the only ones to consider making to your supply chain as a whole should you be fortunate enough to receive additional logistics funding.
However if the axiom that you have to spend money to make money holds true, they should do a good job of demonstrating to your company that when it comes to warehousing efficiency, you truly won’t take any funds you receive lightly -- and that when you say warehousing upgrade, you don’t just mean “new;” you mean “improved.”
David Frentzel is Vice President Of Global Contract Logistics, APL Logistics, one of the world’s largest providers of warehousing and other supply chain management services. It operates distribution centers in more than 50 countries. Visit www.apllogistics.com for more information.
