Warehouse ROI Reality check

Dec 12, 2007 7:59 PM  By

“People are our most important asset!” You see that statement on the walls of companies in every industry. Well, I am here to tell you that statement is not correct–especially in your warehouse! Because if you have the wrong people, doing the wrong things, how is that considered an asset to your company?

The correct statement should be: “The right people are our most important assets.” But what happens to those assets in tough times? They are downsized, right-sized, dumb-sized, laid off, and so on. And what are you left with, some of the wrong people trying to perform tasks they are not capable of performing, with very little training.

More than likely the training department has been right-sized as well (assuming you had a training department in the first place). Then you sit back and wait for your operating cost to decrease so you can begin seeing the ROI. What’s weird is that it doesn’t come. Or at least not the return you were expecting. Why is that?

People are constantly telling you that your warehouse is full of assets and not merely costs. But the reality of it is, most companies view investments in these assets as “throwing good money after bad.” As one CEO told me, “We have done everything possible to improve our warehouse operations, and we have not realized a return on our investment yet!”

As always, my questions after hearing those statements are, “What was it costing you before the purchase” and “What should it be costing you?” We all have an idea of what, the costs associated with the warehouse are, but we do not know what they should be.

Even when I ask, “What does the average picker make in your industry,” no one seems to know. When I ask, “How many pickers should it take on average to handle the number of orders you are processing,” or “What is the average number of returns in comparison to the number of orders being processed in your industry,” no one seems to know. And when I ask, “How much training does the average receiver receive, and can I see a progressive flow chart through the warehouse?” that is when the laughter starts.

So what should you be doing? You must begin by analyzing your current processes and creating realistic goals for your warehouse. Your sales personnel have them; your accounting department has them; even your CEO has them, why shouldn’t your warehouse have goals too? This is the key to creating goals for your warehouse; they have to be achievable even if it takes a lot work and some heartache.

As one warehouse supervisor told me, “It is not realistic to expect returns to decrease by 50%.” He felt the company always had the same number of returns even before he was hired, so why should anyone expect them to decrease now. Do you think he would have said that during his interview for the position? No, but that is also part of the problem! We hire people to maintain the status quo. Then we are amazed when they do just that.

Therefore, your true path towards goal setting and attaining a return on your investment must begin at the top. If there is no commitment there, you can’t expect the people below to do anything except what they are currently doing.

Rene’ Jones is the founder of Total Logistics Solutions (www.logisticsociety.com), a warehouse efficiency company.