Measuring the cost to pack each order is important to maintain overall margins.
Typically we include variable costs, such as wages and packing materials.
Example:
Wages $100,000
Pension 401K/Superannuation $10,000
Boxes, bubble wrap, tape and consumables $50,000
Total costs $160,000
Orders packed 40,000
Total costs 160,000 / Orders packed 40,000 = $4 per order
Customers expect their orders to be shipped in full and to arrive on time. DIFOT is a standard way of ensuring our warehousing and distribution is meeting customer expectations.
Warehouse layout can be optimised by dividing inventory into A-B-C:
A - Fast-moving / High-demand (Typically 20% of items)
Location: Closest to packing/shipping stations
Goal: Minimize walking/picking time
Storage Tips: Pick face at ground level / waist height
B - Medium moving (Typically 15% of items)
Location: Mid-range
Storage Tips: 1 shelf above A items, close to A
C - Slow moving (Typically 5% of items)
Location: Furthest from shipping station
Storage Tips: High shelves, bulk storage, alternative warehouse
Labour productivity is typically measured using total lines picked divided by hours worked.
Ways to improve:
- Track picks/hour per worker/shift/SKU
- Conduct time and motion studies
- Offer bonuses for high pick rates with low errors
- Use barcode or RFID scanners
- Mobile devices with real-time WMS access
Inventory shrinkage is usually a combination of:
- Errors in inventory receipting
- Inventory count errors
- Inventory dispatch errors
- Waste and damage
- Theft
Ways to improve:
- Cycle counting instead of annual stocktakes
- Barcode/RFID scanning for all movements
- Implement a Warehouse Management System (WMS)
- Track shrinkage by SKU, zone, or shift
- Create a “no blame, just report” culture
