Making Warehousing More Efficient

Abstract

Warehousing costs have climbed sharply and capital expenditures allotted to warehousing have failed to keep pace with other aspects of business. There are at least three reasons for selecting the warehouse as a target for productivity improvement:¹

• 1. A typical manufacturing concern has 30-to-35 percent of its total under-roof space devoted to the storage of raw materials or finished goods inventory. In most parts of the U.S., increases in construction costs of warehouse space have exceeded the rise in the cost of living. On the average, warehousing costs climbed almost 80 percent between mid-1975 and mid-1979. Higher space costs, along with higher interest costs, have focused attention on the effective use of available space.

• 2. For manufacturers, warehousing costs (for both raw materials and finished goods) constitute six to eight percent of the sales dollar. Any reduction in warehousing costs quickly flows through to the bottom line. Being labor-intensive, the warehousing function has been especially sensitive to the rapid escalation of labor costs. So worker productivity is a prime concern in attempts to reduce costs.