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RUNNING HEAD: Assignment 3 Warehouse Costs
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Warehousing is the controlling of space and time. Almost all companies incur the same basics of cost, but they complete them in a different manner. Some of the warehouse costs are ignored or wasted because the specialist does not know where they belong. Some of the warehouse costs include;
Handling. This involves all the expenses that are incurred in the process of moving product in or out of the warehouse and the handling cost of the products. Labor that is used to handle the product is the largest component. It includes the receiving, put-away, order assortment and packing. Handling also includes all the costs that are associated with the equipment’s that have been used to handle such products in the warehouse. Other handling expenses can include rail car, trash disposals, and operating supplies.
Storage is the second warehouse costs. They are the costs that are associated with goods at rest. They are costs that are incurred whether the goods moved or not as long as those good occupied a facility. Such costs mostly accumulate each month. Storage expenses are the total occupancy cost for a facility if that facility is dedicated to an operation.
Another warehouse cost is the operation administration. They are the expenses that re-incurred in the process of supporting the operation of the distribution center. If a facility is closed, then such costs can be eliminated. Such costs include; clerical effort, information technology, taxes, insurance and supplies (Napolitano, 2003).
General administration expenses are the other warehouse cost. They are the costs that are not incurred for a particular distribution center. They include; general management, non-operation staff, and general office expenses.
As seen, there is a need for warehouse costs to be minimized so as the company can experience some profits. Labor is considered as the largest expense in the warehouse and it can account for up to 50% of a warehouse total operating costs. Labor costs can be minimized through; investing in training and re-certification of employees, revision of labor scheduling strategy, monitoring productivity and implementation of Vendor management system among others individually. Operation costs can be minimized through identification of the best, trustworthy and productive employees, use of cross-functional teams to solve problems, improve process daily and getting rid of excess inventory. Costs can also be reduced through implementation of technology. If one considers a new, advanced warehouse management system, it will cut costs of the warehouse (Richards, 2011). The use of electronic data interface to communicate with customers can also lower costs of warehousing. Facility management can also play a vital role in reducing costs in warehousing. Investigating efficient fans and buying energy in bulk can cut expenses in a warehouse. Turning off outdoor sprinklers can also be vital in cost reduction.
Napolitano, M. (2003). The Time, Space & Cost Guide to Better Warehouse Design: A Hands-on Guide to Help You Improve the Design and Operations of Your Warehouse Or Distribution Center. Distribution Group, 2003.
Richards, G. (2011). Warehouse Management: A Complete Guide to Improving Efficiency and Minimizing Costs in the Modern Warehouse. Kogan Page Publishers, 2011.
Simchi-Levi, D., kaminsky, P., & Edith, S.-L. (2008). Designing and Managing the Supply Chain: Concepts, Strategies and Case Study. New York: McGraw-Hill Companies Inc.
