F. Curtis Barry & Company Blog

9 Key Factors Shaping US Warehousing and Distribution Through 2026

jbarry@fcbco.com (F. Curtis Barry & Company) — Mon, 11 Aug 2025 11:08:39 GMT

Over the past few years, supply chain professionals and leaders have watched one historic disruption after another: a global pandemic, port shutdowns, labor unrest, inflation, tariff battles and even droughts and missile attacks that rerouted shipping lanes.

Although some bottlenecks have eased, the environment remains anything but settled. Warehouse operators, distributors and third‑party logistics providers face a volatile mix of macroeconomic headwinds, geopolitical tension and rapid technological change that continues to rewrite the industry playbook.

They’re grappling with rising interest rates and labor costs even as oversupply in some markets puts pressure on pricing; they’re reassessing global sourcing strategies amid nearshoring and shifting trade policies; and they’re deploying automation and AI to stay competitive in an increasingly digital landscape.

In short, distribution professionals must be ready for constant change and cultivate dynamic networks that can flex with whatever comes next. The following nine factors illustrate the wide array of trends that could shape warehousing and distribution operations through 2026.

1. Artificial intelligence becoming universal

A 2025 Plain Concepts report notes that more than 80 % of commercial supply chain applications will embed warehouse AI and data science capabilities by 2026, and early adopters have already cut logistics costs by 15 %, lowered inventory levels by 35 % and improved service levels by 65 %.

As the report puts it, “AI is moving beyond experimental pilots; digital twins, predictive demand and route optimization are becoming table stakes.” For mid-sized fulfillment centers, cloud-based WMS and TMS platforms with built in AI will democratize these tools, but success will hinge on data quality and disciplined change management.

2. A wave of consolidation in warehouse automation

According to UPS’s Q3 2025 freight market outlook, the warehouse automation market is worth about US$29.9 billion and is growing at roughly 16 % per year. In that outlook UPS notes that “leading contract logistics providers such as GXO, DHL, CEVA and Amazon are acquiring robotics companies and systems integrators” to secure scarce technology.

Investor enthusiasm in warehouse automation is evident in the July 2025 public listing of robotics maker Geek+, which one analyst says underscores the sector’s momentum. This consolidation should expand access to robots as a service models for smaller shippers, yet fewer independent suppliers may limit pricing leverage. Mid-sized companies should explore leasing and multi-vendor strategies to avoid dependence on any single platform.

3. Nearshoring to Mexico reshapes cross border logistics

In a 2024 survey by KPMG, executives predicted that by 2026 roughly 69 % of supply chains serving US customers will be based in the Americas, up from 59 % two years earlier, and that Mexico’s share of operations will jump to 36 %, overtaking Canada.

Meanwhile, government statistics show US-Mexico trade has grown 31 % since 2018, and investment linked to nearshoring surged 165 % in the first quarter of 2025.

This pivot implies a boom in cross dock and transloading facilities in border states such as Texas, Arizona and California, where freight shifts from Mexican to U.S. carriers. Central U.S. warehouses may see slower growth, but safety stock requirements mean they won’t disappear entirely. Companies with moderate scale should consider whether positioning inventory closer to Mexico will improve lead times and duty management.

4. Simplifying networks by cutting unnecessary nodes

In the drive for resilience, many companies are rethinking the number of hand offs in their networks. “Reducing supply chain nodes and steps” doesn’t mean eliminating warehouses; it means consolidating redundant cross docks and intermediate 3PL hand offs, so goods move directly from source to regional distribution centers.

Digital twin models help identify where inventory can be pooled without harming service levels. The goal is a smaller number of flexible, often automated facilities that are closer to customers and can scale up or down quickly.

5. Labor shortages and wage pressure continue

Warehouse labor remains tight. A mid 2025 wage survey by C3 Solutions found that dockworkers at major U.S. ports earn $30-36 per hour (up to $42 in high-cost coastal cities), warehouse workers average $18-20 per hour nationwide, rising to $25 in expensive markets.

Broad economic forecasts point to average hourly earnings rising 3-4 % annual wage growth. Immigration constraints and aging workforces could push logistics wages higher still. Companies should budget for continued wage inflation and strengthen retention through training, career paths and flexible scheduling.

6. Automation as a hedge moves from factory floor to fulfillment center

Many discussions often frames automation as a manufacturing story, but third party logistics providers are equally active. In a 2025 case study, Locus Robotics notes that DHL and other 3PLs deploy robots for picking, unloading and sorting tasks, integrating them with warehouse management systems to boost throughput and improve worker satisfaction. Robots handle repetitive work while people focus on exceptions and quality.

For fulfillment operations with revenue as low $20 million, automation is becoming accessible through leasing, robots as a service or outsourcing to tech enabled 3PLs. Starting small, adding autonomous mobile robots to reduce walking in the right environment, could yield quick productivity gains without tying up capital.

7. Rising interest rates and a “wall of maturities” threaten investment

In its 2025 commercial real estate outlook, Deloitte warns of a “wall of loan maturities” totaling roughly $600 billion in 2024 and another $500 billion in 2025. Many industrial property owners financed projects at rock bottom rates; refinancing now means paying interest near the 4.5 % federal funds rate.

For warehouse owners, this can squeeze cash flows or force distressed asset sales. Lenders are tightening credit, so speculative construction is slowing. Tenants should diversify their landlords and monitor financial health; sudden ownership changes can lead to lease renegotiations or maintenance cutbacks.

8. Vacancies climb as the construction pipeline remains full

According to CommercialCafe’s July 2025 industrial report, builders delivered 146.6 million square feet of industrial space by mid 2025 and kept another 341.8 million square feet under construction. With tenants delaying leasing decisions amid tariff and economic uncertainty, vacancy rates climbed to 7.1%, the highest since 2014, even as warehousing capacity contracted for the first time in more than a year.

Inventory costs also surged to 80.9 on the Logistics Manager Index, the highest in over two years, driven by elevated labor, storage, and insurance expenses. Analysts expect fewer new starts over the next year as lenders pull back, but projects already underway will hit the market, keeping vacancy elevated.

Many vacancies are in outdated or poorly located buildings, so modern distribution centers in major hubs should remain in demand. Occupiers with moderate budgets may find bargains in secondary markets but should factor in transportation costs.

CommercialCafe’s data show that the 341.8 million square feet under construction includes both bulk distribution warehouses and specialized industrial projects such as electric vehicle battery plants and light manufacturing facilities. The pipeline is not “lower than expected”; it exceeds pre pandemic averages, reflecting investors’ rush to capitalize on e commerce growth.

Developers are now pausing speculative projects in response to higher financing costs and tariff uncertainty. Demand for true fulfilment centers, those designed for high velocity, remains relatively healthy.

9. Storage prices soften as costs rise elsewhere

According to ITS Logistics, Q2 ITS Logistics US Distribution and Fulfillment Index, the index highlighted an unusual trend: the Producer Price Index for Warehousing and Storage dropped 5.1 % even though labor and inventory costs were still rising. Consumer sentiment rose 16% in June, signaling cautious optimism amid stabilizing economic conditions.

Analysts blamed the decline on an oversupply of space and skittish tenants; the report observed that “the supply of operationally ready warehouse space is tightening, but prices fell as operators competed for customers”.

This warehousing PPI is compiled by the U.S. Bureau of Labor Statistics; its technical notes describe it as part of a family of indexes that measure the average change over time in the prices received by producers - in this case, the fees charged by warehouse operators, and specifically place warehousing and storage services within the final demand transportation and warehousing category.

The takeaway is that warehouse operators across the sector have been forced to discount rates to fill their buildings, underscoring a mismatch between capacity and demand despite higher operating costs.

The coming two years promise both volatility and opportunity for warehousing and distribution professionals. Navigating this landscape will require more than passive observation, it demands proactive planning, continuous learning and the willingness to reengineer processes as conditions evolve.

At F. Curtis Barry & Company, we’ve spent decades helping companies like yours build resilient, technology‑enabled supply chains that can weather uncertainty and capitalize on growth opportunities. Whether you need to benchmark your labor costs, evaluate automation options, redesign your distribution network, our consultants are ready to assist.

Don’t wait for the next disruption to force your hand reach out to F. Curtis Barry & Company today to start charting a course through the challenges and opportunities ahead.

Realities of AI and Automation in Warehousing & Distribution

jbarry@fcbco.com (F. Curtis Barry & Company) — Wed, 30 Jul 2025 15:00:23 GMT

Artificial intelligence and automation have become daily talking points in supply chain circles. According to a recent survey, nearly every distribution executive says they have implemented AI in at least one area.

The broadening use of AI and automation in distribution has continually pushed the idea of dark warehouses, those that are fully automated and require minimal to no staffing to operate and fulfillment orders. Yet the drive toward a fully automated dark warehouse is still years away at best – and for many businesses isn’t even a reality at this point. This is mainly due to the high-cost of entry with automation for small and mid-sized businesses.

Most warehouses continue to add robots, automation and controls piece by piece, while humans still handle many day-to-day tasks, supervision, management and complex exceptions. DHL reports around a 30 percent jump in operational efficiency after rolling out autonomous mobile robots. These gains highlight both the promise and the limits of automation.

This article takes a balanced look at where AI and automation are making measurable progress in warehousing and distribution, and where hype outpaces reality. It sets out to help you separate genuine value from marketing buzz, and to encourage you to make decisions based on data, not fashion or hyped-up trends.

Robotics & AMR's Acceleration Versus Human Expertise

Robots are being introduced into warehouses at scale. Autonomous mobile robots travel the aisles, carry bins and reduce walking distances. As previously stated, DHL reports a 30 percent lift in operational efficiency after adopting AMRs.

This number sounds impressive, and it is. But it does not mean people are gone. In fact, the company still brings in seasonal workers to handle spikes in demand. Robots do not pack every box or solve every problem. They take over repetitive tasks, such as moving carts and picking standard items. People still handle exceptions, operate forklifts, maintain equipment and manage customer service.

The bigger story is collaboration. Cobots, or collaborative robots, work side by side with staff. Names like Locus, Geek+ and 6 River are just a few of the names people are familiar with in this category. They guide pickers through orders and carry heavy loads. They reduce strain and increase productivity without eliminating jobs.

Employees appreciate these aids because walking distances decrease, accuracy improves and overall throughput increases. It is important to measure success through both productivity and worker satisfaction. The days of not worrying about worker satisfaction are gone, the high cost of labor, loss of productivity and HR costs associated with employee turnover make this an important metric.

But even with these benefits, consider the following statistics:

As of a 2025 study, Locus Robotics celebrated its 5 billionth pick, which is impressive. However, Locus is only in 150 leading ecommerce, distribution and 3PL businesses across 350 sites.
When 6 River was sold by Shopify in 2023, they were only in 70 businesses across 100 sites.
GreyOrange reports 10,000+ robotics deployed across more than 100 sites globally, but this is across all robot types (goods‑to‑person, sortation, forklift, etc.), not just Ranger‑Assist cobots.

This is in no way to diminish the accomplish of these companies, they should all be celebrated for their accomplishments. But consider the following statistics:

In southern California, an air quality management district compiled a list of large “warehouse distribution centers” and identified 3,321 warehouses larger than 100,000 sqft.
A study in Illinois mapped 2,401 leased warehouses of at least 100,000 sqft covering roughly 632 million sq ft.
A 2024 study mapped out roughly 1,700 in NJ, all over 100,000 sqft.
2024 study using CoStar data estimated that about 149,075 warehouses of all sizes existed in the contiguous US.

The number of sites in the US, over 100,000 sqft, utilizing various forms of robotics and cobots is relatively low. This speaks to several aspects, including rate of adoption, cost of entry, usability and applicability in different operations, etc.

If you are evaluating robotics, or cobots, look beyond claims of labor elimination. Ask about training, maintenance and how the system handles errors. Compare the cost of leasing or buying robots against improved throughput and lower turnover. Plan for a mix of human skills and mechanical power.

AI Adoption and AI‑Washing

Every vendor now seems to claim AI. Surveys show wide adoption, yet adoption at depth remains limited. Research found that about forty percent of startups claiming to use AI have no AI at all. Many companies simply rebrand older automation routines as intelligent agents. This tactic, known as AI‑washing, misleads investors and customers, and slows progress.

Regulators are starting to respond. The U.S. Federal Trade Commission warns vendors to be honest when advertising their AI capabilities. The Securities and Exchange Commission recently fined two investment firms for making false claims about AI. These actions signal that hype without substance carries risks.

How do you avoid being fooled? Ask vendors to explain their models. Do they employ data scientists? What data is used to train the system? Does it adapt to new information? Request proof of performance, such as error rates or predicted versus actual outcomes.

Be skeptical of generic statements about self‑learning or human‑like reasoning. Look for openness about limitations and human oversight. It is easy to be swept up by the promise of AI. Take time to verify. A balanced approach will protect your investment and support honest innovation.

Dark Warehouses Vision Versus Reality

A dark warehouse is a facility run entirely by automation. Workers only enter for maintenance and inspections. The idea sounds futuristic. Yet industry experts note that we are still several years from full realization.

Operators are introducing automation piece by piece. They add palletizers, robotic unloaders and smart conveyors. They integrate these with warehouse management systems. They do not switch off the lights overnight. For small to mid-sized businesses, the reality is that some goods to person technologies are difficult to achieve a reasonable ROI.

Consider the following assumptions. Let’s say a smaller ecommerce operation employs 35 people throughout all aspects of the distribution center. This would be everyone from receiving, shipping and inventory control functions.

At $28 per hour, including all benefits and overhead, it is roughly $58,000 annually. Popular goods to person technologies from Opex and AutoStore for example are no less than a $2,000,000 entry point when factoring in equipment, engineering, onboarding, integrations and annual support.

To achieve a 3-year ROI, the ecommerce company in our example would need to reduce headcount by 10-11 FTE’s beginning in year one. This just isn’t financially achievable.

A 5-year ROI would require reducing FTE’s by at least 6 to 7 in year one – this still is not achievable, and with the cost of money these days, businesses do not have the appetite for a five-year payback.

Many warehouses handle varied product lines, which makes complete automation hard to justify. The workforce factor matters too. Labor shortages push automation forward, but most companies still need people. Workers maintain equipment, solve exceptions and provide customer service.

For your business, start with targeted warehouse automation. Consider automation and robotics for the functions where you invest the most in labor costs and those areas where errors and customer service impacts erode margin and customer satisfaction. Measure benefits and challenges before expanding. A fully dark facility might be an end goal, but a hybrid approach allows you to adapt to change and manage costs. Ensure that the warehouse automation ROI is sound and realistic.

Data infrastructure and IoT

AI thrives on data. Without consistent, accurate information, machine learning models falter. Warehouses these days utilize a wide array of sensors, barcode scanners and connected devices to gather data on every movement. IoT trackers, such as FedEx’s SenseAware, let shippers monitor shipments with real time updates on location, temperature and security status. These sensors feed alerts if conditions shift. This type of visibility is important for pharmaceuticals, food and other sensitive goods.

Inside the warehouse, IoT sensors track stock levels, temperatures and humidity. They help prevent spoilage and maintain compliance with storage standards. Fleet management systems use sensors to monitor vehicle location and engine health. This information supports predictive maintenance, reducing downtime.

Good data infrastructure involves more than silos of data captured by devices. It requires integration across systems. Warehouse management, transportation management and enterprise resource planning systems must share data in near real time.

Data must be cleaned and standardized. Perfect data is not required but neglecting quality leads to false insights. Avoid relying solely on spreadsheets or manual entry. Invest in middleware or cloud platforms that connect devices and systems. Build a small team to manage data quality and analytics. Your AI analysis and results will only be as insightful as your data foundation.

Questions to Ask Yourself

Many people become enamored with various technologies and the potential for improvement. They tend to rush in headfirst without considering different aspects. Before you jump in, think about the following:

What problems are you solving? Before investing in AI or automation, define clear goals. Do you want faster shipping, fewer errors or better safety? Clear goals guide your choices.
Are you measuring the right things? Throughput matters, but so do accuracy. Speed without accuracy is completely useless. Make sure your metrics reflect your priorities, not someone else’s.
Do you understand the vendor’s technology? Ask for details about algorithms, data sources and human oversight. Avoid products that hide behind buzzwords.
How will your team adapt? Automation changes job roles. Plan for training, maintenance and culture change. Engaged employees help technology succeed.
What happens when the system fails? Exceptions always occur. Have a plan for human intervention, manual overrides and recovery procedures.
Does this align with your budget and timeline? Robots and AI services have costs. Compare them against realistic benefits. Consider phased adoption.

These questions push you to think critically. They help you avoid adopting technology for its own sake. They ensure that each investment supports your unique business needs.

AI and automation are transforming warehousing and distribution. Adoption is broad on the surface, yet deep integration is still limited. Robots, AI and automation improve efficiency, but people still drive decisions. Good people, with strong leadership and proper training will push your company forward in significant ways.

F. Curtis Barry & Company has decades of experience in warehouse and supply chain consulting. Our team helps you evaluate warehouse automation options, design data strategies and select vendors. We work with your staff to build processes that fit your business. We focus on practical results and measurable gains. Connect with us to discuss how we will help you move forward with confidence.

Understanding Fulfillment Costs to Improve Warehouse Operations

jbarry@fcbco.com (F. Curtis Barry & Company) — Mon, 21 Jul 2025 11:00:08 GMT

Understanding Today’s Fulfillment Costs

Most businesses today are under more pressure to control fulfillment costs. With rising labor rates, tight warehouse space, and growing customer demands, leaders need better clarity on what fulfillment should cost–and how to manage it.

"Recent data gives us a clearer picture. Whether using in-house operations or a third-party logistics (3PL) provider, most companies spend between 5% and 15% of gross sales on fulfillment costs," according to Brian Barry, President of F. Curtis Barry & Company.

This excludes outbound shipping profit and cost. Efficient operations can land on the lower end, while operations with lower order values or limited automation can creep toward the top.

Here are five quick takeaways to keep in mind:

Fulfillment costs often fall between 5% to 10% on the lower end, and upwards of 15% of gross sales on the upper end.
In-house warehousing becomes more cost-effective with good systems and order volume.
3PL services are flexible, and reduce the need for certain investments, but may cost more on a per order basis or as a percent of sales.
Low average order values can make fulfillment look more expensive than it is.
Tracking both cost per order and fulfillment costs as a percent of sales gives a better view of performance.

Understanding fulfillment costs is not about cutting corners. It’s about knowing where money goes and using that knowledge to make better decisions.

The Challenge for Mid-Sized Business

Mid-sized companies operate in a tight spot. They are past the early startup phase but not yet large enough to have full economies of scale. Many bring in tens of millions in annual sales, balancing both e-commerce and wholesale orders. They face challenges that small businesses avoid and large companies have already solved.

As order volumes grow, labor needs shift, warehouse space becomes strained, and simple processes no longer hold up. These changes make fulfillment costs harder to manage. Leaders often don’t know their true fulfillment costs, and struggle to properly track the data. It is also difficult, or impossible, to understand how their numbers compare to others in the industry.

That’s why operational benchmarking is so important. Without it, it’s hard to know if you’re overpaying or on track. Comparing your own warehousing costs to what similar businesses pay can highlight gaps, help you plan better, and keep costs in line as you grow.

The Case for In-House Fulfillment to Control Fulfillment Costs

Handling fulfillment in-house gives companies more control over their operations. It also allows better visibility into where money is being spent.

The main cost areas include:
• Labor: warehouse workers, supervisors, and support staff
• Space: rent, utilities, maintenance, and taxes
• Materials: boxes, labels, tape, and other packing supplies
• Equipment: shelving, carts, scanners, and related tools

When mid-sized businesses run efficient operations, they can keep fulfillment costs close to 5% to 8% of gross sales. These companies often have strong systems, solid order volume, and trained teams. On the other hand, those with less automation or lower order counts may see costs rise to 10% or even 15%.

In-house fulfillment can be the better choice when a company has enough scale to spread out fixed costs. It also allows room to improve over time through better layout, stronger team management, and smarter space use.

This also means that companies must make solid investments in all areas from leadership to warehouse management systems, use of barcode technologies and beginning to consider appropriate levels of automation.

The Case for 3PL Fulfillment

Outsourcing to a third-party logistics (3PL) provider shifts the burden of labor, space, systems, automation and materials to an outside partner. Instead of running a warehouse, businesses pay for services like storage, picking, packing, value added services and basic administration.

It is not uncommon for companies using 3PLs to spend between 10% and 15% of gross sales on fulfillment. This percentage includes all warehouse-related activity, but not outbound shipping. Some companies, especially those with low order volumes or complex items, may pay closer to 20%.

The main benefit of a 3PL is flexibility. You can scale up or down without adding staff or space. But that flexibility comes at a cost. A 3PL must cover its own overhead and add a margin, which can raise your effective cost per order.

A 3PL also puts the burden of labor seasonality on the third party. This can be significant challenge for many businesses that are highly cyclical. Also consider not having to invest or integrate a warehouse management system by using a 3PL.

Being in a shared warehouse environment allows you to also leverage automation and technology that you couldn’t otherwise afford.

Comparing Fulfillment Costs Between Fulfillment Models

Understanding your fulfillment costs means using the right measures. Two common ones are cost per order and fulfillment costs as a percent of sales. Both matter, but each tells a different part of the story.

Cost per order is simple. It shows how much you spend to process one order. This is useful for tracking warehouse performance, especially over time. But it doesn’t account for the value of what you're shipping.

Fulfillment Costs as a Percent of Sales puts cost in context. It shows how much of your revenue goes toward fulfillment. This helps when comparing across time periods or against other businesses.

Fixed costs and variable fees also affect the math. In-house operations and 3PLs often carry fixed costs that get spread across all orders. It’s the variable part of a 3PL model that may end up costing more overall. But with the 3PL you should be gaining fulfilment leadership that you wouldn’t necessarily be able to afford in-house.

Low order values can distort these numbers. If your average order is small, even a modest cost per order becomes a large share of sales. That’s why companies should monitor both measures and understand how each one changes with volume and efficiency.

What the Numbers Tell You – and What They Don’t

Fulfillment numbers can guide smart decisions, but they don’t tell the full story on their own. Industry averages help set overall benchmarks, but every business has its own mix of products, order sizes, and warehouse processes. Without knowing how these averages are built, or what costs they include, companies can make bad decisions on what to do.

Understanding your true cost-to-serve is key. This means looking beyond high-level percentages and digging into the parts of your operation that affect cost. Labor hours per order, space use, and inventory turns all play a role.

Measuring yourself over time, and comparing the results, is often more valuable than trying to compare yourself to an industry average that is made up of companies from different verticals, product mixes and even different levels of complexity and sophistication.

Recent industry data shows that while wages and rent have gone up, many companies have held their fulfillment cost steady. They’ve done this by improving warehouse productivity–better layouts, stronger training, and smarter scheduling.
Numbers matter, but context matters more. What works for one company may not work for another. Use the data as a guide, but always look at your own trends and operations before making changes.

Growing Pains and the Danger Zone with Fulfillment Costs

Growth is good, but it often brings higher fulfillment costs. As order volume rises, many mid-sized businesses see their cost ratios spike. This usually happens before new systems, staff, or space are fully in place.

When fulfillment costs creep above 15% of gross sales, it’s a sign that something needs attention. Maybe the warehouse is too small. Maybe labor is stretched. Or maybe order volume is growing faster than your ability to process it efficiently.

Read more about controlling fulfillment costs with these other resources:

These spikes are common during periods of growth and scaling. The key is planning. If you know growth is coming, prepare by adjusting your layout, adding shifts, or upgrading systems. Waiting too long can lead to missed orders, slow delivery, and wasted money.

Growing pains are normal, but they should not become the new normal. Keep a close eye on your fulfillment numbers during high-growth periods to spot problems early.

Why This All Matters

Fulfillment spending directly affects your profit. When costs get out of hand, margins shrink, and growth slows. That’s why knowing your numbers and tracking trends should be a regular part of business reviews.

Poor visibility is a common issue. Many businesses don’t know exactly how much they’re spending on warehouse labor, materials, or space. Without clear data, it’s hard to spot waste or set goals for improving the operations.

If you are managing the operations, you should review fulfillment costs as part of your monthly financials. Look for shifts in total cost per order, increases in warehousing costs, or rising costs as a percent of sales. These are early signs that something is off.

Fulfillment is not just an operations concern. It’s a financial lever. When managed well, it creates room for reinvestment and better service. When left unchecked, it eats into growth and adds risk. With costs rising and executives demanding more from operations, you don’t want to be caught without a planning for turning the operations around.

Getting a Handle on Fulfillment Spending

Controlling fulfillment costs starts with measurement. You need clean, regular data on labor hours and payroll, packing material use, order volume and order profiles, and warehouse space and costs. Without this, improvement is guesswork.

Most companies lose money in a few common areas: poor warehouse layout, slow picking processes, and lack of proper systems or technology. Even small issues, like using the wrong size box or walking too far between picks, add up quickly. Having strong warehouse fundamentals is critical to your success.

To improve, start with simple changes. Measure how many orders each worker handles per hour. Review how much you spend on supplies per order. Check if your storage racks are full or if you’re paying for empty space.

Sometimes, the model itself needs a review. If your 3PL fees are rising faster than your revenue, or if your in-house team is missing ship times, it may be time to reassess your approach.

Good data leads to better decisions. And better decisions help reduce supply chain costs without hurting service.

A Measured Next Step with Your Fulfillment Costs

Managing fulfillment costs is possible, even in a tough market. It takes regular review, the right metrics, and clear steps to improve. The key is starting with what you can see–and then acting on it.

If your costs feel too high or unclear, now is the time to get help. A warehouse optimization and fulfillment operations assessment can show where you stand and what to fix. It gives your team a plan backed by real benchmarks.

Since 1984, F. Curtis Barry & Company has helped businesses improve fulfillment, warehousing, and distribution. We work with retailers, manufacturers, and ecommerce companies to solve their distribution and supply chain challenges.

If you're ready to cut waste, improve processes, and track the right numbers, we’re here to help. Reach out to schedule a conversation or learn more about how we can support your goals.

Breaking Down Fulfillment Costs: What's Affecting Your Cost per Order

jbarry@fcbco.com (F. Curtis Barry & Company) — Thu, 20 Feb 2025 21:07:26 GMT

There is no doubt that metrics play a vital role in managing fulfillment centers, efficient operations and warehouse labor. Various metrics, like Cost per Order Fulfilled (CPO), allow us to understand how operational costs impact profit margins and more.

But one major problem is that many managers are unsure of how to get under the number and truly understand what they mean – or how to set a course of action.

The importance of metrics is to first tell us are we trending the same, improving, or declining. The second importance of metrics is to help us zero in on the problem and how and where to fix it. This is where most managers struggle.

Executives and ownership don’t want excuses, they want to know what is happening, why it is happening, and what your course of action is going to be. And if you can’t provide this to them, they will find leadership that can.

What we are going to do is break down fulfillment Cost per Order, what to understand how to think about it, and what actions you should take. All of this is designed to help you provide your management with clear, concise actions based on what your metrics are telling you.

How is Fulfillment Cost per Order (CPO) Measured

Fulfillment Cost per Order is a metric that takes a holistic view of what it takes your operations to fully fulfill customer demand. It takes into account the following aspects:

Occupancy Costs/Facility Costs

o Monthly warehouse costs and offsite storage space

o Monthly utilities (gas, electricity, water, internet, etc.)

o Warehouse insurance, security and common area maintenance/improvements

Fulfillment Labor Costs

o Direct labor costs (receiving, picking, packing, shipping etc.) including hourly rates, benefits and employee costs

o Indirect labor costs (inventory, clerical, value added services, etc.) including hourly rates, benefits and employee costs

o Management and supervisory including benefits and employee costs

Packaging Materials and Supplies

o Pallets

o Shipping boxes and poly mailers

o Bubble wrap, air pillows, peanuts, paper, tape etc.

These costs can be rolled up and reported at a weekly, monthly, quarterly or yearly time period with the corresponding orders. However, it is most effective if the data points are plotted weekly and viewed over time instead of trying to make judgements week by week.

Additionally, since you need to collect the data in these various buckets, it is critical to not just watch the trend on cost per order, but to also watch trends on direct labor costs or packing supply costs.

By watching the trends at the subcategory levels, and the rolled-up cost per order level, companies can very quickly understand what actions to take. Do not overlook this need.

Lastly, we never recommend rolling up outbound shipping costs or revenues into these figures. These can always be looked at as a separate line item, but many times marketing drives the outbound shipping costs and free shipping thresholds, not operations.

Factors that Affect Cost per Order

The following sections highlight the need to track the subcategories of facility costs, labor and packing supplies separately.

Labor is often one of the highest costs in the distribution center budget and should get the most attention. These costs can be much more volatile than the facility costs on a week to week or even monthly basis. If your labor costs are trending higher, consider the following points.

Receiving and Putaway

1. Are receipts taking longer to process? If so, what is causing the issue. Is it problem receipts, or are there unnecessary steps you’re asking workers to follow?

2. Are receipts becoming more difficult to process? Are your vendors following your vendor compliance guidelines? Is it time for you to implement a vendor compliance program? Are you enforcing these guidelines vendors?

3. Is your putaway process becoming more costly? If you are simply putting a higher volume of inventory away, your only option is to just be as efficient as possible. Consider how putaway could handle some level of top off replenishments when it is opportunistic. Stage putaway inventory in a logical manner that minimizes travel distances.

Order Picking

1. Is the labor cost higher due to an increase in either the lines or units being picked? If you aren’t tracking lines or units on a regular basis, let this be your reminder to get started immediately. Consider more logical pick batches to be more efficient at picking. Avoid discreet order picking unless your system provides no other choice. Consider using a dynamic hot pick zone for the fastest moving SKUs.

2. Are you picking more kits on the fly or sets than previously, therefore more lines and units than previously? Companies can usually build kits faster in an assembly line process than a kit on the fly. This will speed up the picking throughput and lowers the overall fulfillment fees.

3. Are your pickers walking longer distances now? This can happen when you do not properly slot a warehouse on a regular basis. This can also point to new processes that have been introduced that slow down a picker or cause them to spend more time at a given step.

4. Have you asked your pickers what bottlenecks should be eliminated? An important step is to continually get feedback from pickers on the processes and what could be improved.

Packing and Shipping

1. Are packers constantly leaving their work areas to get supplies? If this is the case, understand why and what can be done. If they are running low on packing supplies, adjust the workstations to hold more supplies, or have a dedicated runner to replenish supplies. If packers are building pallets, have a runner remove full pallets and stage a new empty pallet.

2. Are packers having to deal with mis-picks on an order? This takes a packer away from the process and slows down throughput. Consider a process where the order is dealt with by dedicated worker or team so the packers can keep going. Deal with the root cause of the mis-picks to lower the total pack cost.

3. Are packaging supplies on the rise due to using the wrong size box, or too much dunnage? It is not uncommon for packers to grab a larger box, and part way through realize it's too big. But instead of replacing with a smaller box, they will add more packing supplies and ship the bigger box. This not only drives up the cost of packaging supplies but also the outbound shipping costs. You must be auditing some portion of outbound orders and retraining workers as necessary. Custom packaging only makes costs worse.

Inventory Control and Replenishments

1. Are you replenishing more frequently than before, driving up headcount and cost? This can happen when pick locations shrink in size to fit more locations in the same size footprint – being out of space can erode profitability. Try setting min/max replenishments at a case quantity increment so that you are splitting cases just to replenish pick locations.

2. Are you having to cycle count or audit and correct more locations and items than before? These are very important functions, but if you are only treating the symptoms then you will never control costs – and you will most likely erode customer satisfaction. These functions correct an issue, but you must get at the root cause of why the mistakes are occurring.

3. Are your operations struggling to find enough open locations to support new inventory or inventory putaway? Consider ways to consolidate stock locations in bulk reserve locations. Avoid consolidating similar SKUs together in a location – these could be SKUs that look similar or similar in item numbers. Even when using barcodes, this can slow down workers.

Customer Returns

1. Are the volume of customer returns on the rise? Focus on the aspects that you can control on the operations side - meaning operational issues and not product quality issues. If it’s due to increased mis-picks, understand why this is occurring and immediately take action. If it is due to damaged items from bad packaging, test alternatives. Efficient returns processing is critical to maintaining a high degree of customer satisfaction.

2. Is the processing time affected by inadequate space in the warehouse? It’s not uncommon to see the returns footprint get squeezed when companies outgrow the current space. Consider ways to more efficiently remove trash and dunnage to keep organized. To keep return fees down, focus on quickly and logically getting inventory dispositioned and removed from the returns department.

Summary

If you are not driving at the "why's", then you are most likely leaving executives and ownership wondering if you can turnaround the operations when trends go downward. It is important to keep a continual process improvement mindset which will translate to improve metrics and performance.

A well-run fulfillment center is constantly tweaking processes and testing new ideas. Your fulfillment operations should never remain stagnant. Review all aspects of your storage costs, packaging costs, administrative costs, and labor costs. Ask what changes could be made to lower the overall warehouse cost.

Third-party logistics can support most aspects for fulfillment, but these models can be more costly than internal fulfillment costs. However, many can offer a more stable cost per order. Fulfillment center pricing is typically a fixed variable model, or cost-plus for larger more complex accounts.

The additional cost must be accounted for when performing your due diligence of fulfillment providers. When evaluating fulfillment companies analyze the hourly rates, storage fees, shipping fees and additional services against your internal costs. A fulfillment service provider can also help you to expand your fulfillment network, but companies need to be careful with the hidden costs of increased inventory. These extra costs often become too high for smaller e-commerce businesses.

When it comes to the cost of shipping, ensure that you are not inadvertently driving up the shipping fees by using the wrong size boxes or too much void fill. Also consider how rate shopping can help lower the shipping rates. Additionally, utilize a strong partner to help review and negotiate shipping rates with carriers that also include the inbound shipping costs when possible.

11 Aspects that Erode Your Warehouse Capacity and Utilization

jbarry@fcbco.com (F. Curtis Barry & Company) — Mon, 03 Feb 2025 16:42:43 GMT

For many distribution centers, it’s a continual battle to keep taking on additional inventory and maintain efficient order fulfillment operations. Those fulfillment and warehouse managers that are continually evaluating space understand that it must be a continual process – always moving and consolidating inventory to gain more space.

The most difficult aspects for companies are when little has been done for several seasons and now the storage space is in disarray, and it’s difficult to know where to begin to open new space for inventory. Before thinking about moving to a larger warehouse space, ensure that you have fully implemented each of the ideas below.

Inefficient Warehouse Layout & Designs that Affect Warehouse Capacity

Inefficient Aisle Widths – When aisle widths are too wide, they eliminate the ability to create more storage. This often happens when a company moves into a new space. When utilizing forklifts, consider that a sit-down reach truck takes aisles that are two to four feet wider than stand up reach trucks. The cost of swapping out lift trucks is far less expensive than having to move warehouses because you are out of space over time.
Underutilized Vertical Space – One of the most common mistakes is companies not initially installing uprights that take advantage of the fully height of their facility. Even if you don’t have the equipment, or need to utilize the full height, the additional cost to install taller uprights is minimal. It is significantly more cumbersome to do this once the racks or shelving is full. However, with full height uprights, you can add lift equipment and additional levels later on.
Excess Dock or Staging Area Space – This doesn’t occur as frequently as other items in this list, however, it occurs frequently for companies that move into new spaces. The danger for most companies is that these areas are consolidated far too much and then present challenges with operational efficiency.

Inefficient Inventory Management Practices Affect Warehouse Capacity

Dead Inventory – One of the most seen issues is companies are reluctant to make timely decisions to eliminate dead inventory. This inventory robs warehouses of valuable space with significant consequences. Companies can easily apply a carry cost to all inventory to help management understand exactly how much margin dollars have been eroded to help determine when an items inventory is actually in the negative.
Holding Onto Slow-Moving Inventory – As with dead inventory, this is another area of concern for companies. Many times, they focus in on new products and inventory, but this creates too many challenges for products approaching end of life. This inventory must be trimmed to manageable positions. Again, apply a carrying cost to this inventory to make timely, factual decisions.
Lack of Slotting Strategy – Slotting is one of the most critical aspects of any facility yet is one of the least implemented strategy in facilities – or is not implemented properly or fully. Warehouse slotting is what will help determine the right size location for each item. When locations are properly sized, companies can recapture space and increase the number of locations for future items.
Excess Packaging & Unoptimized Pallet Builds – Bulky or unnecessary packaging can consume valuable warehouse space. It is better to optimize packaging to efficiently use space, even if this means taking some time on the inbound processing to remove excess packaging. Additionally, companies should evaluate whether pallets should be down stacked or optimized in other ways.
Lack of Consolidation – One of the largest impacts on bulk storage is the honey-comb effect and stock locations are partially utilized. Companies should continually evaluate which items and bulk stock locations need to be consolidated to free up locations. When it comes to bulk locations, it is acceptable to combine a bulk overstock location and place two or three SKUs in the same location. This is not recommended for picking locations though, this should remain as one SKU per location.

Storage Equipment Inefficiencies Affecting Warehouse Capacity

Wrong Racking Type for Inventory – If you are storing palletized goods, ensure that you are using the right type of racking. Select pallet rack is great for many applications, however, if you have a significant number of pallets for the same SKU consider options like push back, drive in or pallet flow for your needs.
Unused Space Above Dock Doors or Overhead Areas – A great place for storing everything from record storage to supplies is overhead of dock doors. This area should be utilized for less frequently consumed supplies, etc. so it will not create congestion or risks during normal operating hours. Supplies can be pulled down off shift and restocked as needed.
Poorly Designed Bin & Shelf Utilization – Another common issue is companies creating a one size fits all shelf height, this is one of the greatest waste of space. This is also true with palletized goods where too much space is provided over the top of product. Often, companies can collapse down these shelf heights and add additional locations. This type of reprofiling must be done on a regular basis.

By focusing on these aspects, companies can maximize the capacity and utilization of their warehouse space without immediately thinking about new warehouse space. It may be inevitable that additional, or new warehouse space is required, but only after all avenues have been exercised.

These are aspects of a well-planned Warehouse Optimization Study that companies should consider implementing. Consider the frequency at which new SKUs are added to your assortment, this is a good indicator as to the frequency at which some of these aspects should be reviewed. Even if you do not have high turnover of SKUs, it wont take long before your warehouse begins to lose efficient use of the capacity and utilization.

Performing Peak Season Audits for Warehouse Optimization

jbarry@fcbco.com (F. Curtis Barry & Company) — Tue, 07 Jan 2025 16:25:51 GMT

The holiday season often represents a make-or-break period for businesses aiming to hit their annual sales forecasts. With Mastercard reporting a 6.7% increase in online spending compared to last year and noting that the final five shopping days accounted for a substantial 10% of holiday sales, it’s clear that consumer behavior continues to shift heavily toward e-commerce.

Deloitte’s prediction that holiday sales would total between $1.58 trillion and $1.59 trillion, with e-commerce growth of 7% to 9%, highlights the magnitude of this shopping season.

However, this surge in demand also placed unprecedented stress on operations that were already running lean due to lower-than-expected pre-holiday sales. This strain underscores the need for a comprehensive post-holiday audit of your warehouse and fulfillment processes.

By quickly assessing how your operation performed during this critical period, businesses can identify challenges, decide on necessary changes, and implement improvements to ensure readiness before the next peak season.

The focus of a warehouse audit and operations assessment is process improvement, cost reduction, improved warehouse utilization as well as improving customer service metrics.

Performing Audits for Improved Warehouse Optimization

The first step in the audit is to form a post-season review team, which should include fulfillment supervisors and some key personnel in the fulfillment center. The team’s observations of what went right, what was marginal, and what needs to be fixed before the next peak season should include finding answers to these questions:

How well did the fulfillment operations perform overall?
- What were the strongest aspects in the operations?
- What were the unexpected challenges that arose during peak season?
- What aspects must be corrected prior to the next peak season?
What, if any, changes need to happen to the overall layout, design and warehouse storage to facilitate efficiencies?
- How about material handling equipment?
- What created the largest bottlenecks and disrupted flow?
How was the overall warehouse utilization and storage capacity in the facility?
- Were you out of space to handle the inventory at peak?
- Was the facility over congested and disorganized?
- What space optimization could be implemented?
How did your picking footprint perform during peak volumes?
- Were the picking locations properly sized with the right amount of inventory?
- Was there excessive walking while picking and fulfilling orders?
- What challenges did pickers have when picking inventory?
Were packing and shipping operating efficiently?
- What challenges did packers and shipping have during peak?
What was your peak season rate of returns?
- What were the reasons for returns, which were DC related (i.e. picking error, broken in transit, etc.)?
- What was the turn around period between receiving the return and processing refund or exchanges?
- Are there any bottlenecks in the returns process that need to be corrected?
What labor challenges did your operations encounter this peak season?
- Are there any recruitment or hiring changes that should be implemented?
- Was training sufficient for onboarding new workers?
- Did you have sufficient training guides and SOPs to assist with the process?
- Did you cross-train all regular associates to pack during the course of the year?
- What was the rate of overtime during the holiday season versus the balance of the year?
- What was the turnover rate for seasonal employees and for what reasons?
How did your warehouse management system perform at peak volumes?
- Were there any areas of the operations that suffered due to the warehouse management system (WMS) being inadequate?
- Did you have all the reporting and monitoring that was needed to efficiently manage peak volumes?
- Were there warehouse processes that should be reconfigured or changed and tested within the WMS?
Did your carriers perform? Were their pickups on schedule?
How well did your inventory and warehouse slotting perform?
- Did you have the right sized locations, or do you need to consider reprofiling picking locations?
- Did you have the right amount of inventory in each location?
- How were your replenishment operations affected?
How could automation aid your operations?
- Is it time to consider shipping line automation or good to person technologies for picking?
How can a 3PL support your operations in full or specific functions?

Your warehouse and fulfillment audit should cover all aspects of the operations from warehouse management systems, layout and design to labor and process improvement. As you work your way deeper into the operations, you should look at your costs, as well as benchmarking and metrics.

The performance of these metrics will help to uncover additional areas that should be assessed. Consider challenging your team on these metrics and results.

What was the labor cost per order shipped during the increased staffing period of your holiday season, vs. your balance-of-year average cost per order shipped? This identifies how effectively you used the temporary holiday labor and how they performed.

What was the cost of training the seasonal labor force? Were they brought in at the right time for sufficient training and to match volume surges, or were they on the payroll too early?

What was the found error rate and subsequent rework required? Are they higher than normal? Why did they increase?

How did the DC perform daily against order volume? Did the facility fall behind scheduled shipments? How far behind by day? What was the order carryover identified as both orders and a percent carryover by day?

For a list of operational benchmarks to consider implementing, utilize our guide for your operations.

To help answer these questions, use departmental reports throughout the center. These include transaction volume reports for orders received, picked, shipped, manifested, returns, back orders processed.

Additionally, service levels achieved (standard or plan and actual) payroll and productivity reports (budgeted and actual) will be needed for a thorough analysis. Also pull your Fulfillment center inventory control reports about inventory adjustments, products not found in picking process, error reporting, etc.

Implementing Changes for Improved Warehouse Optimization

Now it's time to implement some changes in your operations. This will give you sufficient time to plan and execute those changes and still have time to test the results. But many ask, where should we start or what should be our priority? Here’s a checklist of some steps to take.

Bring your workforce down to the size required for your post-holiday business forecast. Nothing increases costs more than excess people on the payroll—and by attempting to manage hours with too large a staff, you’ll wind up sending employees home early multiple days per week, running the risk of losing key associates who can’t afford to work less than 40 hours.
This is also a great time to evaluate all employees and retain the workers who performed best. Frequently you’ll find gems in the seasonal staff who are better than some of your regular associates. So, bite the bullet, make the difficult decisions, and reduce staff quickly.
Perform inventory consolidation in your warehouse storage, both to organize warehouse storage and create space for new product arrivals. Consolidating inventory now will save inbound labor dollars later, as well as ease and expedite the ability to locate product.
Assure your key performance metrics are in place for pick, pack, ship, replenish, receive and put away. Be certain you are generating reporting on all the key indices which will help you manage expenses, including labor hours and dollars (regular and premium) measured against volumes received and shipped (units, lines, orders, boxes).
Reconfigure your warehouse slotting and pick locations to reduce travel time to a minimum. Relocate items appropriately to slow moving or to fast moving picks to create efficiency. Remove seasonal items from the pick line so you are not walking by them each day.
If you didn’t cross-train all regular associates to pack last year, begin now for next year and continue cross-training throughout the year. Be sure any new employees retained from the seasonal worker ranks are fully trained and performing to standard. Training for seasonal associates is often quick, so if you are retaining people, make sure they are properly trained to be successful.
Develop a fulfillment to-do list from your post-season audit. Assign responsibilities and follow up to assure the tasks are being performed. If you have never developed goals and objectives for your operation and your fulfillment staff, this is the perfect time to start. Goals and objectives or key performance indicators are the most objective method of evaluating individual performance. Successful accomplishment of goals and objectives adds to the profitability of the company.
Create your fulfillment budget for the next fiscal year. Remember that an effective budget reflects improvement in performance and reduction of expense to enable the company to offer wage increases where appropriate.
Review transportation contracts. When shipping volume is down, every penny of cost becomes critical. Knowledgeable review of both inbound and outbound transportation contracts and costs can typically yield strong savings.
Review your packaging supply vendors for performance or cost. If you’re still using Uline, you are overpaying for supplies and can most likely find a local supplier that is cheaper and can supply you the next day as well.
Determine if this is the time for experienced help to assist you in reconfiguring the warehouse layout and design. There are many ways to improve layout within your current walls to expand capacity and improve efficiency.
Along those lines, are your systems generating the necessary results in the required time periods, or is your fulfillment center losing efficiency because your systems are unable to perform? This is a great time to develop a systems requirement document identifying your needs for growth and for performance.
Conduct objective individual performance evaluations for your salaried staff. Objective and honest evaluations of individual performance are the building blocks of great teams.

And finally, the only good thing about slow volume is that it affords you the opportunity to evaluate past performance failures and to implement change for future performance successes.

Utilizing Put Walls in Warehouses and Fulfillment Processes

jbarry@fcbco.com (F. Curtis Barry & Company) — Fri, 06 Sep 2024 16:51:44 GMT

What Are Put Walls in a Warehouse?

Put walls are systems used in warehouse operations to streamline the order fulfillment process. They consist of a series of compartments or slots where workers place picked items for individual orders. Each compartment represents a single customer order. Put walls create significant efficiency in the picking process by allowing bulk inventory picking from various warehouse zones.

When items are picked in bulk, and sorted down at a centralized location, this minimizes picking errors and human error. Put walls can either be manual or fully automated systems depending on volume and item characteristics. Additionally, put walls can be used for building kits, not just order picking.

Put walls are very flexible, supporting a wide range of products, order sizes and order types. This flexibility makes put walls beneficial for a wide range of warehouses. For manual put walls, a worker would physically take items and sort them down to their designated compartments.

This is done through the use of barcodes with workers being directed to a compartment, typically utilizing a series of lights and LED displays. Some manual put walls will utilize voice directed headsets as opposed to light displays. Automated put walls will utilize autonomous robotics and sortation to physical build orders.

These types of technology allow for a more automated warehouse environment which can decrease labor costs, increase throughput and lower error rates. Put walls are a great option for a wide range of ecommerce, retail and wholesale distribution businesses.

The main benefit of put walls is leveraging the most efficient batching and bulk pull of items from a picking perspective. The sorting to the order level allows companies to focus on packing and shipping with a high degree of order accuracy. This speed and accuracy are what drives high customer service and inventory accuracy.

From a systems perspective, put walls integrate with warehouse management systems (WMS) and warehouse execution systems (WES). This allows for the process to be more tightly tracked and managed from an efficiency and order tracking perspective.

By utilizing barcodes, along with put to light technology, allows for real time inventory and order visibility and tracking. Warehouse operations are able to process a high volume of orders with less manual intervention and oversight than traditional picking. This allows operations to scale much more easily. These advancements allow mid-sized and large distribution centers to optimize processes and reduce labor costs.

How Do Put Walls Work?

Put walls work by organizing and consolidating picked items from different warehouse zones into individual compartments. Each compartment represents a single customer order or shipment.

This begins with batch picking items in a wave. Items are picked in bulk throughout the warehouse. Once the items are picked, they are transported to the put wall area. Companies tend to utilize one of the following methods for transporting the bulk picks:

Regular pick carts, or inner packs and cases pulled from pallets.
Utilizing conveyors to pull items picked from various warehouse zones to a consolidation point.
Autonomous mobile robotics to take the place of conveyors.

Once the picked items reach the put wall area, each item is placed in a designated slot or tote corresponding to a specific order. One common approach is for the worker to scan an item, a corresponding light come on for the designated compartment. The worker places the item and confirms the process, usually with a button on the compartment.

Once all picked items for an order are placed in the designated compartment, a light will come on letting a packer know an order is complete. At this point the order is ready for packing and shipping. This system helps minimize confusion and human error. Additionally, it ensures that items from different picking zones are correctly sorted.

The process described is typical of manual put wall technologies. However, put wall systems can be manual, or highly automated. With manual put walls, workers are responsible for sorting items into specific slots using barcodes.

With automated put walls, companies typically utilize conveyors and scanning tunnels to direct robotics to handle the sorting process. This significantly decreases the amount of warehouse labor needed to oversee the process. Utilizing barcodes or RFID for identifying SKUs ensures accurate sorting and order building. This flexibility allows ecommerce order fulfillment to scale mid-sized and high-volume fulfillment centers.

Put walls integrate with Warehouse Management Systems (WMS) and Warehouse Execution Systems (WES). These systems allow for real-time tracking of all inventory and orders in the fulfillment process.

For example, once all the items for a particular order are picked and sorted to the designated compartment, packers are notified. Packers can then pull the items for that order and a packing slip can be automatically generated to go with the shipment. For orders that require multiple shipments, this process is handled seamlessly with no intervention.

Both manual put walls and automated put walls allow for faster order fulfillment processes with less labor costs and higher accuracy.

Benefits of Using Put Walls in Your Warehouse

Put walls offer many benefits to improve warehouse efficiency and employee productivity. One of the main advantages is increased speed in the order fulfillment process. These include the following:

High efficiency in the picking process. Pickers can zone pick their respective items without having to walk the entire fulfillment center. This also eliminates the number of trips to a single pick location for high volume items.
Allowing for efficient zone picking reduces bottlenecks and congestion within the operations, this reduces labor costs.
Items can be picked and sorted faster than traditional picking operations, with a high degree of accuracy by using barcode scanning. This reduces labor costs and improves customer service.
Orders can be picked, packed and shipped faster. This allows for meeting customer demand with higher throughput, especially at peak times. During holidays, this will help to avoid orders that miss the cutoff window with carrier pickups.
High degree of order accuracy reduces the number of customer satisfaction issues and returns. Additionally, it helps to eliminate the number of re-ships due to picking errors. This will greatly reduce operating costs, labor costs and lost shipping dollars.
Put walls allow for better utilization of staff which decreases labor costs. Fewer workers can process a higher volume of orders in the same period of time. The packing process can be streamlined without having to put order accuracy on the packer.
Automated put walls allow for warehouse operations to utilize labor on more value-added tasks, rather than a repetitive task like sorting.
New hires can be trained and onboarded much faster. This allows them to be more productive when utilizing technologies like put walls. This makes them an excellent for fulfillment centers with a high rate of seasonal workers and temp hires.

Types of Put Wall Systems

Put wall systems can be configured in several ways. Each design configuration can meet a wide range of functions from ecommerce order fulfillment to building kits and sets for a wide range of businesses or operations.

As previously discussed, the most basic style of put wall is a manual put wall. With these, the following process is fairly typical:

Picked items arrive at the put wall area.
Typically, a tote, or series of totes, are directed to a worker at a specific put wall.
Those totes represent all the items for the batch of orders that will be sorted at that specific put wall.
A worker will take the inventory out of the tote and scan the barcode on the item.
A light or display will illuminate at the corresponding compartment for the order requiring that item.
The worker will place the item in that compartment and confirm the task by pushing a button at the display or light.
Once all items for an order have been placed in the compartment, a light or display on the opposite side lets the packer know an order is ready to be packed out.

With manual put walls, it is not uncommon for operations to print pack slips on demand and distribute them to the corresponding bins while the picks are being sorted. Another option is printing the pack slip on demand as each order is packed out.

For most small to mid-sized e-commerce order fulfillment, these types of put walls are most common. They provide significant efficiency gains with reasonable returns on investment. For smaller businesses, manual put walls offer a good starting point for improving order consolidation and decreasing travel time.

For large ecommerce order fulfillment, automated put wall systems can provide significantly higher throughput volumes, scale to a higher degree, and require much less labor overall.

Automated put wall systems take order consolidation to the next level. These systems utilize mobile robots to take the picked items and deliver them to the corresponding compartments for order consolidation. This eliminates a worker having to distribute the picked items to the corresponding compartment.

In different environments, workers are inducting the picked items to a conveyor system. The items are passing through a scan tunnel where the item is identified, and robotics deliver it to the correct order compartment.

Automated put walls integrate seamlessly with warehouse management systems (WMS). Like manual put walls, this allows for real-time tracking and improved inventory accuracy. These robotic put walls are ideal for larger distribution centers that need to process high volumes of orders and want to eliminate travel time.

These systems have a much higher cost of entry compared to manual put walls, but for high volume distribution center operations, these can have a favorable payback.

Optimizing Put Walls for Warehouse Efficiency

Implementing and operating put walls require distribution centers to change some of the operational planning. To efficiently utilize put wall, and to maximize the technology, consider the following:

Operations need to align the number of orders with the put walls capacity. Distribution centers need the cube and weight of items to ensure that the compartments are properly configured and can handle the size of the items.
Operations need to ensure that wave sizes match the available put wall compartments. This will help prevent bottlenecks and keeps the processes and workflows optimal. Overloading the put wall with too many orders can slow down sorting. Underutilizing put wall compartments will negatively impact your ROI. This is where a warehouse management system or a warehouse execution system can optimize wave size to get the most out of put walls.
Companies need reassess the order profiles and SKU profiles to determine if the compartment sizes are still appropriately sized. If orders and SKU sizes increase, this may lead to increased compartment sizes - which may lead to additional put walls. This is where Key Performance Indicators (KPIs) can help monitor throughput and labor efficiency. The flexible configurations are critical as businesses grow and evolve.
Continually analyze how to improve the ergonomics of the put walls as well as the flow with packing and shipping. This will maximize the effectiveness of the put walls in your fulfillment operations.
Regardless of how pickers pull inventory from pick locations, consider how conveyor systems or autonomous mobile robotics (AMRs) can transport picked items to the put walls. This reduces unnecessary walking by pickers which reduces labor costs.

By proactively making adjustments and leveraging real-time data from a warehouse management system or warehouse execution system, distribution centers can ensure that their put wall system remains a vital tool in maintaining high levels of efficiency.

Challenges and Considerations When Implementing Put Walls

For e-commerce fulfillment, multichannel fulfillment, retail distribution, and even kitting, there are significant benefits to put wall systems. From real-time visibility and fulfillment accuracy to improved customer satisfaction, put wall solutions and put to light systems are a great automated option. However, there are several challenges that must be considered before selecting and implementing a put wall solution.

The largest is the upfront cost that must be considered. This is especially true for robotic put walls versus manual put walls. Understanding the total cost of ownership is critical. It must include the upfront integration costs, warehouse management system or warehouse execution system or modules, and the ongoing service and maintenance. Smaller companies may find the cost of entry a hurdle, but a quick automation assessment can help identify opportunities.
The installation process may cause some disruptions within your existing operations. Space will need to be opened up to install the put walls and reconfigure the packing and shipping lines. Distribution centers will need to have this space open and available for the installation.
Companies will need to have a warehouse management system (WMS) that is capable of managing the put walls. There are instances where a warehouse execution system (WES) is more flexible and can do a better job of managing the hardware and order distribution. These systems are critical to gaining the intended fulfillment efficiencies.
Along with the need for a WMS or WES, systems integrations are one of the most important tasks. Poorly planned and programmed integrations will cause delays and issues with attempting any type of go live. Some companies will need to bring in outside programming resources and integration expertise. Equally as important is the testing phase of the implementation. Testing will need to cover all types of orders, SKUs and scenarios to ensure everything from the systems to the hardware are working appropriately.
Staff training is essential for both manual and automated systems. Workers need to be comfortable with the new processes and technologies, which may involve a learning curve. Providing thorough training ensures a smoother transition and maximizes the system's effectiveness. This is the only way to ensure you hit your targeted fulfillment productivity goals and labor efficiency.

Considerations When Choosing a Put Wall System for Your Warehouse

There are many put wall solutions available for mid and large high-velocity fulfillment and distribution centers. Selecting the right type of put wall solution involves decisions on both the hardware as well as having the right software (WMS or WES). The factors that should drive your decision should include the order profiles, SKU weight/dimensions and your overall budget.

For smaller operations with limited throughput, manual put wall systems may be the most cost-effective and practical option. These options are more budget friendly and can be installed faster than automated put walls. Maintenance and support are also less than that of automated options. This leads to a faster ROI and labor efficiency.

When choosing a put wall system, companies need to consider the types of products that will be handled. A more flexible configuration will be needed for those operations that deal with a wide range of SKU sizes, etc.

As an example, a modular put wall with adjustable compartments would be more beneficial. Those companies with high seasonal swings, will need a put wall system that can easily scale up and down as the need arises. This can also be where automated solutions utilizing robotics can heal cope with the swings in volumes as opposed to human labor.

The amount of open warehouse space and your physical layout will also have a direct impact on choosing the right put wall hardware and configuration. Automated put walls utilizing robotics can take a fair amount of space in the distribution center. Your put wall location is dependent on the packing and shipping lines.

Summary

These systems will decrease labor requirements and improve the overall operator workflow for many ecommerce companies. Consider the cubby configuration flexibility and your products and order profiles. Considering using a warehouse consultant that can assist your company with evaluating various options and developing a comprehensive, realistic ROI for your company to consider.

The Real Costs in the Ecommerce Customer Returns Process

jbarry@fcbco.com (F. Curtis Barry & Company) — Sat, 17 Aug 2024 13:44:26 GMT

The customer returns process is one that many retailers understand to be a critical aspect to customer loyalty. Make the returns process cumbersome and difficult, and customers are apt to avoid future purchases. To structure a sound customer returns process, companies must first understand the real costs associated with returns.

Dealing with customer returns poses a growing challenge, for businesses often underestimating the costs involved. Retail and ecommerce companies can see return rates that range from 1%-3% on the low end for durable goods, to as high as 35%+ for high fashion apparel.

These returns not only affect revenue, but also strain logistics, customer support and inventory management systems. Factors like restocking fees reverse logistics and possible product devaluation can significantly increase the burden. Companies need to acknowledge these expenses to develop a solid returns management process. The best way to uncover these aspects is a disciplined warehouse optimization assessment.

Key Takeaways Regarding Customer Return Processes

High Return Rates. Ecommerce experiences much higher return rates compared to physical stores, especially in apparel and electronics.
Reverse Logistics Expenses. An efficient returns process involves intricate logistics such as transportation, inspection and restocking which are often costlier.
Customer Service Impact. Dealing with the customer return process demands substantial customer service resources, leading to increased operational expenses.
Inventory Management Challenges. Returns can complicate inventory management processes resulting in excess stock or outdated products.
Environmental Sustainability Concerns. The environmental impact of returns is significant due to increased carbon emissions from transportation and additional waste generated by returned items.

The True Expense Associated with the Customer Returns Process

The expansion of online purchases has undoubtedly made the purchasing process more convenient. It has also resulted in a notable uptick, in the volume of returns. While the promise of a hassle-free return process and exchanges is commonly used to provide a positive experience. However, the actual financial impact of the return process is frequently underestimated.

For retailers managing returns goes beyond a logistical hurdle; it involves a complicated and costly procedure that impacts their profitability, operational efficiency and customer contentment. Recognizing these expenses is crucial for companies aiming to sustain a performance while providing excellent customer services.

Layer in the cost of customer return due to the wrong item being shipped out, and the operational costs skyrocket. Consider the following chart based on one of our clients' costs.

Original Order Costs
Picking labor Packing labor Shipping labor	$4.75
Shipping cost to customer	$8.50

Customer Return and Reship Process
Customer service inquiry	$4.50
Shipping return back to warehouse	$5.50
Labor to process and refurb returned item	$3.60
Repackaging costs	$0.30
Putaway from returns Picking labor Packing labor Shipping labor	$5.10
Shipping back to customer	$8.50
Total Costs	$40.75

Additional Costs/Impacts

How many customers won't purchase again, and what is the cost to acquire a new customer?

What is the impact on poor customer experiences and reviews impacting other potential customers?

What is the financial impact on not having customers return items due to such a low inventory value that it would cost more to process a return than just shipping a new order out?

This highlights the need to identify the cost of ecommerce returns and the need to proactively reduce the rate of returns. This is especially true when the types of returns are associated with picking errors in the warehouse.

The most critical takeaway:

A business processing 1,000 orders per day on average handles roughly 250,000 to 260,000 orders annually.
A simple 5% return rate results in 12,500 to 13,000 return orders.
Assuming there were zero warehouse errors, only customer satisfaction issues, this would result in at least $160,000 in lost labor not including freight, etc.
How much more is lost by customers not ordering again?

Managing the returns process, also known as reverse logistics, is critical to driving out operational costs. Unlike logistics operations that are streamlined and well-defined, reverse logistics entails unpredictable factors such as the condition of returned items restocking requirements and the possibility of unsellable products.

Each stage—ranging from inspecting returned merchandise to refurbishing or repackaging—demands resources that increase operational costs rapidly. Furthermore, the expenses associated with managing returns often surpass those linked to shipping orders. This underscores the necessity for companies to refine their strategies for logistics in order to minimize these financial burdens.

Defective products and poor product quality are additional aspects that not only drive customer returns, but also erode customer experiences. Your customer service team must be an integral part of uncovering of any good returns management process.

The Influence of Ecommerce Returns on Inventory Management

Ecommerce returns not disrupt the flow of goods, but these returns also play a significant role in inventory management. When items are returned, they must go through an extensive inspection and rework process before they can go back into inventory.

Unfortunately, many of these customer returns come back to the distribution center after peak season. For an ecommerce business, this can create substantial inventory problems. Common situations that can affect inventory include:

The original packaging may be damaged, making the item difficult to resell.
Defective items and quality issues can create a return to vendor bottleneck.
Returns after peak seasons can create an influx of inventory that may be difficult to sell.
High return rates from electronic devices can create bottlenecks in having to potentially test items before dispositioning inventory.
Returned apparel can often lead to odd sizes left in inventory that must be managed. Additionally, these items often require extensive rework and inspections.

There are two main problems associated with returns. The first is that customers want to be refunded or receive their exchange order quickly. The second is that in many companies, there is a planned return rate.

This return rate is factored into their buying plans. Returns must be expediated so as to reship those units on other orders. The longer companies wait to process returns, the more other customers are affected, further reducing profitability.

The varied return status can lead to situations where companies struggle to sell, or worse face issues like inventory obsolescence where returned items lose value or become outdated.

Moreover, handling the influx of returned products can introduce complexities in warehouse operations leading to inefficiencies and increased labor expenses. Effectively addressing these challenges is essential for minimizing the impact of returns on inventory health.

Effective Returns Management Processes

To develop a smooth returns process, companies must understand the costs and the impacts on customers. Once these understood, it is time to look at the following:

Why are returns happening in the first place, and what can be done to reduce the inflow of customer returns?
What can be done in your operations to efficiently handle those customer returns that arrive at the warehouse?

Understanding Customer Returns and Reducing the Inflow

Ecommerce companies need to proactively analyze customer returns, customer feedback, return requests and their overall returns policy. By addressing these challenges head on, companies can reduce the impacts on inventory, operational costs, and customer disruptions. Begin by focusing on these areas:

Analyzing Customer Return Data.

Why Returns are Happening: Begin by examining return data to identify patterns. These could range from issues like sizing, variations in color, product flaws and defects, or missed customer expectations.

How to Reduce Customer Returns: Utilize this data to implement targeted improvements such as refining product descriptions, improving visuals and offering sizing guidance. By pinpointing reasons for returns companies can proactively address issues.

Improve Product Descriptions and Imagery

Why Returns are Happening: Inaccurate or inadequate product descriptions and visuals often lead customers to return items. When a product falls short of expectations returns become almost inevitable. This could be due to inaccurate colors in images or the full item not being visible leading to missed expectations.

How to Reduce Customer Returns: Elevate product listings with descriptions multiple high-resolution images showcasing various perspectives and even video demonstrations. Providing thorough information empowers customers to make informed choices reducing the chances of returns.

Enforcing Stringent Quality Checks

Why Returns are Happening: Returns frequently stem from product defects or subpar quality that slip past quality control measures.

How to Reduce Customer Returns: Strengthen quality control protocols to ensure products meet customer standards before shipment. Consistent quality translates into returns due to defects or customer dissatisfaction. Receiving must have access to accurate product samples and the system must be able to help guide them through the inspections process. This begins with merchandising and buyers providing critical data to support the process.

Introduce Virtual "Try On" and Size Recommendation Tools

Why Returns are Happening: One of the causes of returns in online fashion shopping is incorrect sizing and not understanding the fit.

How to Reduce Customer Returns: Incorporate try on tools and size recommendations that utilize customer information to suggest the suitable fit. By assisting customers in selecting the size before making a purchase this approach can significantly lower returns due to sizing discrepancies.

Improve Customer Support Before Purchase

Why Returns are Happening: At times, customers feel uncertain about a product to buying it leading to dissatisfaction and subsequent returns.

How to Reduce Customer Returns: Provide live chat support or easy access to customer service for addressing queries before making a purchase. Offering assistance can help resolve uncertainties and ensure that customers choose the suitable product for their requirements.

Set Realistic Customer Expectations

Why Returns are Happening: Many returns occur due to expectations especially when customers anticipate more than what the product offers.

How to Reduce Customer Returns: Establish clear expectations by improving communications and details about product features, advantages and limitations. Providing information regarding what the product can do, or wont do, will enable customers to make decisions based on a wealth of information.

Encouraging Customer Reviews and Feedback

Why Returns are Happening: Customers often depend on the opinions of others when making purchase choices. The absence of feedback can result in expectations.

How to Reduce Customer Returns: Promote customer reviews. Showcase them prominently on product pages. Reviews offer insights for buyers, aiding them in grasping the product better and determining if it meets their needs.

By prioritizing these approaches online retailers can not only understand why returns are happening, but also better support the customer.

Developing an Efficient Customer Return Process in the Warehouse

1. Create a Designated Returns Area. It is important that the returns processing area is sufficient to handle your returns. Most companies tend to squeeze these areas down to the point where the congestion creates inefficiencies. The returns area must be sufficient to handle the following:

Staging of inbound shipments as they arrive, separated by date received.
Space to separate the inventory from dunnage, as well as space to accumulate waste.
Lighting and space or tables needed to handle detailed inspections, testing and repackaging.
Staging for inventory good to go back into stock as well as inventory to be destroyed.

2. Establish Clear Procedures for Customer Returns. Having a standardized process for managing returns is critical to any operation. Develop a step by step process for receiving returns that covers:

Checking returns in from the dock.
Looking up customer order information and processing the return in the warehouse management system.
How to inspect item conditions and disposition inventory.
What rework or repackaging is required if the item is to be returned to stock.
How are items to be destroyed or returned to vendors.
How should inventory be staged based on inventory disposition.

Training warehouse staff on this process will ensure everyone is on the page and can handle returns smoothly.

3. Utilize Return Merchandise Authorizations (RMAs). An RMA system can be utilized to streamline return processes by assigning identifiers to each return, simplifying tracking and management. Implementing an RMA system that requires customers to obtain authorization before returning items helps capture details like the items, quantities, reasons for return and product conditions. This system assists in prioritizing and overseeing returns at each processing stage.

4. Perform Thorough Inspections. It is crucial to inspect returned items to evaluate their condition and determine if they can be resold, refurbished or need to be disposed of. Training warehouse staff to conduct inspections by using a checklist to check condition component completeness and resale potential ensures that returns are processed accurately and efficiently.

5. Establish a Grading System for Returned Items. Creating a grading system for returned items enables categorization based on their condition. By assigning grades such as A for the best conditions, and F grades for items needing refurbishment or disposal companies can streamline decision making processes regarding restocking or further actions. This system also helps improve inventory management and processing efficiency.

6. Enhance Reverse Logistics Operations. Effective reverse logistics management is crucial for handling the transportation and processing of returns in a cost-effective manner. Partnering with carriers and negotiating rates are key steps in optimizing this process and shipping costs - especially for returns associated with shipping the wrong item on an order.

For companies managing return volumes collaborating with a third party logistics provider (3PL) could be advantageous. Moreover, integrating logistics data into the warehouse management system (WMS) offers visibility and control, over the returns process.

7. Automate the Handling of Returns Where Feasible. Integrating automation, into the return process can minimize errors, expedite processing times and enhance efficiency. Utilizing technologies like barcode scanners, and automated sorting solutions can streamline the receipt and handling of returns. These tools make it easier to identify returned items ensure inventory updates and efficiently direct items to their next appropriate steps.

8. Introduce Cross Docking for Swift Processing of Popular Returns. Cross docking allows redirecting returned items that are in demand to go directly to fulfillment. This keeps inventory from undergoing the traditional restocking process only to be immediately picked. This approach is especially beneficial for products with return and reorder patterns. By implementing a cross docking system these items can be promptly inspected and sent straight to outbound picking and shipping reducing handling time and related expenses.

9. Track and Improve Return Performance Metrics. Monitoring essential return metrics is crucial for pinpointing inefficiencies and areas for improvement in the returns process. Establishing performance indicators such, as return processing time, return rate, restocking duration and the proportion of returned items offers valuable insights. Regularly evaluating these metrics allows improvement of the returns process leading to better warehouse organization staffing choices and overall operational effectiveness.

10. Staff Training and Empowerment. Having prepared employees is vital for managing returns and ensuring a seamless process. Regular training sessions covering return processing procedures, technology utilization and customer service components linked to returns enable staff to carry out their duties. Empowering them to recognize and propose improvements cultivates a culture of progress. This ultimately improves the returns handling process in the long run.

24 Reasons Not to Compare Your Metrics to Industry Benchmarks

jbarry@fcbco.com (F. Curtis Barry & Company) — Wed, 07 Aug 2024 16:20:24 GMT

Key performance indicators (KPIs) and metrics are one of the best management tools any company can implement. They can provide actionable insights to improve the operations to drive down costs and inefficiencies.

But there can be a significant downside. That downside is in attempting to compare against “industry standards or benchmarks”. This is not to say it shouldn’t be done, but it should be done with a lot of caution. But we have seen the following scenario play out so many times.

The CEO comes into a meeting and wants to understand why their picking efficiency is so much lower than an industry they read in an article.

The danger is always in trying to get behind this “industry benchmark” and understand the makeup of the data and the companies behind it. Without access to the raw data or even detailed breakdowns or categorizations of company profiles, the results are difficult at best to utilize effectively.

The following 24 points, focused specifically on picking only, highlight why these industry numbers can lead to more wasted energy than they are worth. This is especially true if no underlying data is available. If you can’t answer these within the data provided, be careful not to give these industry numbers too much value within your business.

What was the sample size of companies, and does it accurately represent your business category?
How many companies are using barcoding versus paper picking in a warehouse management system (WMS)?
How many companies are using co-bots to support picking?
How many companies use goods to person technologies for picking automation?
What are the other company’s average lines per order?
What are the other company’s average units per order?
Are any of those companies using pick to light or voice picking?
Which of those companies are picking from pallet versus shelving or carton flow?
How many companies have implemented disciplined slotting routines?
How many companies are discreet order picking versus cart bin picking or other methods?
How many SKUs (i.e. pick locations) does each company have in their pick path?
How many companies are building kits or sets on the fly versus picking pre-built kits?
Which companies are using a pick and pass method or conveyors to move picked orders to packing?
How many companies in the mix are consumer versus business to business?
Who is picking apparel versus appliances or medical devices or supplements?
What size order batches and waves is each company picking?
What level of inspection is each company doing for products picked?
Who must verify lot numbers or expiration dates when picking?
Which companies are capturing a serial number at the time of pick?
Which companies are picking inner packs or cases, but the volume is counted as eaches?
How many companies have a DC where the pick path is physically broken up into different areas?
Which companies have strong leadership versus those who have struggled to attract good talent?
How good are each company’s onboarding and training processes to get new hires up to full efficiency?
Which companies still pick by item number versus location sequence?

So, what do you do? If you have relative confidence in the data behind the benchmarks, use them accordingly. If not, temper expectations internally on utilizing them.

Then, who is the one competitor you should benchmark against? The answer is simple – it’s yourself. It’s benchmarking yourself and understanding your trends over time. In the instance of picking, take your metrics and drive at the following:

What has happened with your average lines and units per order? If the lines and units are up, this will impact the average orders picked per man hour and cost per order.
Has the product mix changed, if the shift is towards smaller items, this should have a positive effect on picking efficiency. Larger heavier items would potentially push your metrics the other way.
Have you added or removed large numbers of SKUs overall? If so, this would have an impact on the pick path, in turn impacting throughput.
Have you implemented additional processes to the pick function that impacts throughput?

Knowing how you trend over time is important. More important is understanding what the number is telling you – and knowing what to do about it. Metrics along with diligently working on warehouse optimization are core components of developing a proactive management approach.

As operations professionals, we must always be working with a continual process improvement mindset.

Warehouse Receiving Processes and Best Practices

jbarry@fcbco.com (F. Curtis Barry & Company) — Thu, 01 Aug 2024 11:35:56 GMT

In the realm of logistics, warehouse managers must have an efficient warehouse receiving process. This can make all the difference in controlling operational costs. Simplifying this process enables businesses to manage inventory effectively. Understanding the best practices in warehouse receiving can revolutionize this aspect.

Optimizing your warehouse receiving processes has many advantages. These include increased accuracy in inventory management to reduced operational costs.

By incorporating strategic approaches, warehouse operations can minimize errors, improve productivity, and throughput. Knowledge of effective practices is vital for maintaining a competitive edge in the industry. Consider performing a warehouse optimization study of your own to identify opportunities.

This article delves into the intricacies of a strong receiving process in a warehouse and best practices. These include advanced shipping notices, proper documentation, inspections, and managing exceptions.

Additionally, we review common mistakes that can affect efficiency as well impact inventory management.

Benefits of a Good Warehouse Receiving Process

The warehouse receiving process is a pivotal component of all warehouse operations, represented by handling incoming shipments. The benefits of an efficient warehouse receiving process include:

Accurate Inventory Levels: It ensures inventory remains accurate and avoids inventory imbalances across the supply chain.
Operational Efficiency: Proper utilization of equipment in the receiving area and receiving docks is important. This includes everything from pallet jacks to automated systems used by warehouse staff. This streamlines operations and keeps equipment costs down, saves labor time as well as operational costs.
Quality Control: A comprehensive quality check during the receiving process upholds product quality. This leads to higher customer satisfaction and throughput.
Enhanced Fulfillment Process: Real-time updates on incoming items ensure that inventory management systems are up to date. This is handled by warehouse management systems (WMS) which are effective for every fulfillment center.
Decreased Human Errors: An efficient receiving process minimizes human errors. By utilizing a WMS, and barcoding, workers can easily record receipts and review packaging requirements.
Improved Supply Chain: Accurate stock counts and proper storage are important to all supply chains. This ensures fast and reliable delivery schedules for operations and end consumers.

Ultimately, an efficient warehouse receiving process is the foundation for operational excellence throughout the supply chain, from inventory management to order fulfillment.

Best Practices for Receiving Process in a Warehouse

Warehouse receiving processes are critical for efficient and accurate fulfillment center operations. Implementing best practices ensures operational efficiency, accurate stock counts, and customer satisfaction. Consider these best practices in your warehouse operations:

Pre-receiving Tasks: Prepping the operations for incoming shipments will improve unloading and dock to stock times. This means having the right equipment and systems in place, from pallet jacks to lift trucks and conveyors or sortation.

Training Warehouse Staff: There must be proper training of receiving staff on processes and in handling incoming shipments. This should include product codes, packaging requirements, and proper storage during putaway. This will minimize human errors and mistakes.

Streamlining Processes: Documenting processes and standards for receiving can improve speed and accuracy. This includes clear guidelines for inspecting, sorting, and verifying shipments.

Implementing Technology: Utilizing inventory management systems and warehouse management systems (WMS) allows for real-time updates on inventory levels. This will help to track inventory across the supply chain.

Scheduling: Coordinating delivery schedules with suppliers and freight carriers to avoid peak times will have a positive impact on warehouse operations. This will also lead to less dock congestion and equipment problems.

Continuous Process Improvement: Regularly reviewing and refining the receiving processes helps to identify bottlenecks and inefficiencies in receiving. This is where a warehouse consultant can help identify improvements.

Advanced Shipping Notices in Receiving

Advanced Shipping Notices (ASNs) are communications that notify a warehouse of incoming shipments before they arrive. An ASN provides warehouse personnel with detailed information, such as:

PO information
Items and descriptions
Quantities
Vendor information
Carrier information
Expected arrival times

ASNs allow receiving staff to be prepared for each inbound shipment including dock scheduling, resource availability and prep for the unloading process. They are critical in reducing dock congestion and ensuring proper storage and processing of incoming items.

Receiving Documentation

Accurate receiving documentation is important for managing incoming shipments. This documentation usually includes purchase order details, packing lists, and the bill of lading.

Warehouse staff must compare physical shipments against these documents to verify that the right inventory is being received. This also helps to ensure the right quantity and quality of goods.

Good inventory management systems aid in updating inventory in real time.

Receiving Inspections

Conducting thorough receiving inspections is a crucial step in maintaining product quality and operational efficiency. Inspections should be performed immediately as goods are unloaded.

This process must confirm that shipment contents match the order details. Additionally, the processes include inspections to ensure that damaged product. Depending on the nature of the products, a quality check may include visual assessments, counting, weighing, or even sampling.

These inspections should keep defective or incorrect items from being received. Once they are received into inventory, the problems only continue.

Receiving Process for Handling Discrepancies

Despite the most disciplined receiving processes, discrepancies will happen. This is especially true when received goods from new suppliers are brought in. Efficient handling of these discrepancies is critical to having a timely dock to stock metric.

Catching these early on in receiving will keep inventory imbalances to a minimum. When a discrepancy like a short ship, damaged goods, or incorrect items is found it needs to be documented.

Warehouse personnel should document the issue for purchasing including item number, PO shipment ID etc. Adjustments should be made in the warehouse management system (WMS) to reflect the actual received quantities.

There should also be clear Standards and processes to follow for returning or refusing incorrect or damaged shipments.

Inventory Putaway from Receiving

Once the inventory has been received and verified, inventory putaway is the next step. Proper storage requirements should be driven from the warehouse management system for data such as which warehouse, zone and aisles.

Without this data available, integrity in the fulfillment process can be lost. The putaway process should minimize handling and touches to be cost effective. Inventory should be stored based on predefined criteria such as product type, demand, and storage requirements.

Efficient putaway contributes to operational efficiency and helps to keep accurate stock counts. Additionally, it is critically important when it comes to replenishing retail, wholesale or ecommerce supply chains.

Automated systems can assist in directing warehouse staff to the appropriate storage locations. This provides best in class real-time updates to the entire supply chain when storing inventory.

Handling Receiving Discrepancies

Strong processes will keep warehouse personnel from mishandling discrepancies in the warehouse. These processes will help to maintain accurate stock counts and ensuring operational efficiency in your fulfillment centers.

Warehouse staff must stay on top of inspecting incoming shipments to prevent inventory imbalances. Here are the typical processes for managing discrepancies:

Identification: Staff should match incoming items against the delivery schedule and Purchase Order (PO). All discrepancies, such as over ships, short ships, and damages, should be recorded.
Documentation: Accurate documentation of any variance is very important. The type of discrepancy should be noted, including details such as product code, quantity, and condition.
Verification: Conduct a quality check to establish the nature of discrepancy. This could relate to product quality, packaging requirements, or incorrect items.
Reporting: Communicate discrepancies to purchasing and other departments in your supply chain for resolution. This ensures the inventory management systems have real-time updates and reduces human errors.
Resolution: Determine if items should be returned to the vendor or if a credit memo is necessary. For damaged goods, a decision has to be made regarding proper storage or disposal of the items.
Adjustment: Update inventory levels in the system to reflect the true count. This will keep bin level locations accurate and reduce inventory errors.

An efficient warehouse receiving process that quickly identifies and deals with discrepancies is critical. This helps to improve customer satisfaction and efficient running of your supply chain.

Mistakes in Warehouse Receiving Processes

Warehouse receiving is one of the most important departments in any warehouse. If problems are not caught quickly and efficiently, the rest of the operations will suffer.

Best in class operations focus on the hiring and training of the receiving department as they understand the impacts. This builds an effective supply chain management team in your company.

But mistakes in this process can lead to several issues that should be explored. Here are the most common mistakes in the receiving process in a warehouse:

Not verifying incoming shipments against the delivery schedule, leading to inventory imbalances.
Inefficient use of equipment like pallet jacks can also hamper operational efficiency.
Warehouse staff may overlook a quality check, putting product quality and customer satisfaction at risk.
Human errors in documenting incoming items can cause inaccurate stock counts, negatively impacting real-time updates in inventory management systems.
If product codes are not correctly matched, it may result in the wrong items being received or becoming dead stock.

Fulfillment center accuracy is essential for the entire supply chain, and operational costs can soar if an efficient receiving process in a warehouse is not in place. Packaging requirements might be disregarded, affecting the safe and proper storage of items.

Lastly, pre-receiving tasks, such as updating inventory levels and preparing storage space, are crucial and skipping these can cause significant delays in the fulfillment process.

To eliminate these mistakes, supply chains must establish clear processes and standards. They must train warehouse personnel thoroughly. Additionally, they must invest in technology to minimize human errors and ensure an efficient receiving process.

Mistakes in Warehouse Receiving	Impact
Inventory Imbalances	Causes overstock or stockouts
Inefficient Equipment Use	Slows down operations
Poor Quality Checks	Compromises product integrity
Inaccurate Stock Counts	Leads to poor inventory decisions
Mismanaged Product Codes	Results in misplacing inventory
Neglecting Packaging Standards	Damages products
Overlooking Pre-receiving Tasks	Delays in product availability