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Warehouse Costs: How To Reduce Costs

A large number of important processes take place in a company’s warehouse. These in turn cause warehousing or storage costs.

With regard to the storage costs, however, further differentiations can be made. For example, a distinction is made between warehouse interest costs and warehousing costs. In the storage costs costs are contained, which refer to personnel, raw materials, goods and areas. In contrast, the focus of the warehouse interest costs is the capital of the company, which is tied up in the inventory.

Warehousing costs

Especially for retailers, their warehouse space for rent is one of the most crucial cost factors of their entire business. But which costs actually belong to the warehouse costs and which possibilities exist to reduce them effectively?

Warehousing costs: These items are included

The generic term of warehousing costs includes, for example, the costs incurred for the storage facilities. These consist, among other things, of energy costs, rent or lease, the necessary insurance, cleaning and maintenance, warehouse and building equipment, as well as interest costs for the invested capital and depreciation.

However, the cost of goods also falls into the category of warehousing costs. These in turn include costs such as insurance, warehouse interest costs and risk costs. These risk costs relate, for example, to price fluctuations, shrinkage and spoilage, inventory differences or damage to goods.

Naturally, costs are also incurred for managing the warehouse. These are divided into personnel costs, material costs and the costs of warehouse logistics. Individual items can be broken down into social security contributions and salaries, office and packaging materials, auxiliary and promotional materials, insurance and operating costs.

The difference between variable and fixed storage costs

A basic distinction is made not only between the interest costs and the storage costs, but also between the fixed and variable costs of the warehouse.

Thereby the fixed storage costs appear continuously. The variable costs, on the other hand, can be subject to fluctuations, as they depend on various factors. Fixed warehouse costs include, for example, set-up costs, rental costs, personnel costs and IT costs. In addition, depreciation is also counted as a fixed storage cost. In contrast, repair and transport costs as well as the costs for consumables fall under variable storage costs.

How can storage costs be effectively reduced?

Above all, companies whose warehouses are above average in size should subject their warehousing costs to a critical review at regular intervals. This also applies to companies whose warehouses contain very expensive products or a large quantity of raw materials from which their own products are manufactured.

In order to better estimate the cost savings potential with regard to storage costs, the first step is to determine all storage costs. These are then to be put into relation either to the costs customary in the industry or to the company’s own costs for storage in previous years.

In the next phase, a number of Ways to reduce warehouse pricing are available. These include optimizing the overall warehousing strategy. Also, an ERP helps keep inventory at an ideal level. If dead capital is found in the warehouse area, it should either be disposed of or used up.

It also makes sense to reduce the number of items with above-average prices in the warehouse and to optimize order quantities in the future. Particularly in the area of variable costs, there is often the possibility of negotiating better conditions.

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