{"id":8600,"date":"2021-02-23T07:03:39","date_gmt":"2021-02-23T12:03:39","guid":{"rendered":"https:\/\/flevy.com\/blog\/?p=8600"},"modified":"2021-02-20T14:08:18","modified_gmt":"2021-02-20T19:08:18","slug":"supply-chain-management-6-building-blocks-of-warehouse-cost-reduction","status":"publish","type":"post","link":"https:\/\/flevy.com\/blog\/supply-chain-management-6-building-blocks-of-warehouse-cost-reduction\/","title":{"rendered":"Supply Chain Management: 6 Building Blocks of Warehouse Cost Reduction"},"content":{"rendered":"

\"\"Cut-throat competition in industries has driven companies to find ways to reduce costs while increasing efficiency.\u00a0 To accomplish this, most companies have skillfully endeavored to streamline Sales, Operations Planning, Forecasting, Inventory Management<\/a>, and Logistics<\/a>.<\/p>\n

One area that has still not grabbed industry\u2019s attention is out-bound Supply Chain Management<\/a>–from packaging to final delivery.\u00a0 Companies generally neglect Supply Chain simply because they do not consider it their core competency.<\/p>\n

Significant Cost Reduction<\/a> in the Supply Chain can be achieved by focusing on 2 main cost categories:<\/p>\n

    \n
  1. Warehousing Costs<\/li>\n
  2. Transportation Costs<\/li>\n<\/ol>\n

    Warehousing and Transportation represent a significant portion of the total Logistics costs.\u00a0 Implementing improvement programs, without any significant capital investments, can enable 20-50% cost saving in Warehousing, 40% in Transportation costs, flexibility, and better service.<\/p>\n

    Supply Chain Cost Reduction in Transportation<\/a> and Warehousing has vast potential, not only in terms of costs, but also Process Improvement<\/a> using Lean Six Sigma (LSS) techniques.<\/p>\n

    The approach to Supply Chain Cost Reduction in Warehousing<\/a> encompasses 3 phases:<\/p>\n

      \n
    1. Set the Baseline<\/li>\n
    2. Determine the Gap<\/li>\n
    3. Implement Lean Six Sigma (LSS)<\/a><\/li>\n<\/ol>\n

      Meticulous and persistent application of Lean Management<\/a> and Six Sigma techniques is at the core of reshaping Warehousing Operations and eradicating sources of waste, variability, and inflexibility.\u00a0 This article is an overview of the 6 building blocks used in Implementing Lean Six Sigma (LSS)\u2014the 3rd<\/sup> phase of the approach to \u00a0Supply Chain Cost Reduction in Warehousing<\/a>:<\/p>\n

        \n
      1. Business Processes<\/li>\n
      2. People<\/li>\n
      3. Performance Management<\/li>\n
      4. Third Party Interactions<\/li>\n
      5. Layout<\/li>\n
      6. Ownership<\/li>\n<\/ol>\n

        \"\"<\/a><\/p>\n

        Let us dive a little deeper into some of the building blocks.<\/p>\n

        Business Processes<\/strong><\/h2>\n

        Business Processes present a huge opportunity for improvement by eliminating redundancies and sources of waste in Warehouse operations (e.g., unnecessary motion or double-handling in Manufacturing). \u00a0Each source of waste represents extra costs and inflexibility that can be reduced or eliminated.<\/p>\n

        \u00a0<\/strong>Business Process Improvement can help reduce:<\/p>\n