Warehouse cost measurement and optimisation, by Ravindran Raghavan. Measuring Utilisation, Performance and Productivity. Warehouse cost centres. Tracking costs. Warehouse utilisation and space optimisation.

1. By
Ravindran
Raghavan
WAREHOUSE OPERATIONS &
PRODUCTIVITY OPTIMISATION
www.ravi311.com
ravi311@outlook.com

2. Role of warehouse in trade transactions
Types of warehouse
Warehouse operations
Key performance indicators
Cost optimisation
WAREHOUSE OPERATIONS
& PRODUCTIVITY OPTIMISATION
Training Content
1
2
3
4
5

3. Earnings before Interest, Tax,
Depreciation and Amortisation
EBITDA
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

4. Sales •Money from
customer
Expenses •Money spent
Profit •Money left
with us
WHERE ARE YOU IN THE PROFIT CHAIN?

5. Is reducing
cost the
answer to
better
profit?
FIRST MEASURE
THE COSTS
AND
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

6. Is reducing
cost the
answer to
better
profit?
Utilisation
Performance
Productivity
FIRST MEASURE THE COSTS
AND

7. Utilisation
How much
is stored per
square feet
Can you
store more
per sq feet?
Performance
One forklift
– can stack
500 pallets
Change the
machine
and stack
more?
Productivity
10 man can
sort 200
SKUs
15 man can
sort 400
SKUs?

8. “Who is the key person of a
warehouse?”
WAREHOUSE COST CENTRES

9. Traditional
godowns
Storekeeper
Modern
warehouse
Warehouse
Manager
Distribution
Centre
Supply
Chain
Manager
WAREHOUSE COST CENTRES
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

10. Who are your key
teams (people) in
your warehouse?
WAREHOUSE COST CENTRES
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

11. Key teams
 Receiving department
 Handling team
 Operations team
 Admin department
 Transport department
WAREHOUSE COST CENTRES
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

12. WAREHOUSE COST CENTRES
Goods in Goods out
Operations
work
Admin work
Handling work
Storage

13. WAREHOUSE COST CENTRES
Transport
cost
Operations
cost
Administrative
cost
Handling cost
Storage
cost

14. WAREHOUSE COST CENTRES
Dollar value
Time
Uniform Unit of
Measure
1
2
3

15. All costs related to
receiving and sending
goods.
Transport
cost
WAREHOUSE COST CENTRES
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

16. Own transport Transport company
WAREHOUSE COST CENTRES
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

17. Own transport
Driver cost
Lorry cost
Transport company
Delivery cost
WAREHOUSE COST CENTRES
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

18. Driver cost
Salary, EPF, leave,
medical cost, permit,
insurance
Lorry cost
Maintenance,
depreciation,
insurance, JPJ
inspection
WAREHOUSE COST CENTRES
Own transport Transport company
Delivery cost
(quotation)
 Per month / day
 Per trip
 Per carton
 Per kg
 Per litre

19. WAREHOUSE COST CENTRES
How do you record cost?
 Cost of transport per month
 Cost of transport per month
per product
All costs related to
receiving and sending
goods.
Transport
cost
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

20. WAREHOUSE COST CENTRES
How do you record transport
volume?
 Number of pallets per month
 Number of kg (or litre) per
month
 Number of carton per month
All costs related to
receiving and sending
goods.
Transport
cost

21. WAREHOUSE COST CENTRES
How to track transport
cost?
 $ per pallet
 $ per carton
 $ per kg
All costs related to
receiving and sending
goods.
Transport
cost

22.  Moving product in or
out of the warehouse
should be included in the
handling cost center.
 In effect, handling
includes all those costs
that are associated with
“goods in motion.”
Handling cost
WAREHOUSE COST CENTRES
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

23.  Staff + workers: salary,
EPF, leave, medical cost,
permit, insurance
 Forklift: maintenance,
depreciation, insurance
 Hand pallet lift + other
equipment
Handling cost
WAREHOUSE COST CENTRES
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

24. How to track handling cost?
 $ per pallet
 $ per carton
 $ per kg
Goods in motion
Handling cost
WAREHOUSE COST CENTRES
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

25.  Storage expenses are costs
associated with “goods at
rest.”
 These costs would be incurred
whether or not any product ever
moved.
 Expenses related to the cost of
occupying a facility.
WAREHOUSE COST CENTRES
Storage
cost
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

26.  Racks – depreciation,
repairs/maintenance, insurance
 Flooring –
repairs/maintenance
 Roof – repair/maintenance
 Lighting
 Security (specific)
 Inventory staff
WAREHOUSE COST CENTRES
Storage
cost
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

27. How to track storage cost?
 Variable spacing:
 $ per pallet
 $ per carton
 $ per kg
 Fixed spacing
 $ per month
 $ per sq feet
 $ per pallet location
WAREHOUSE COST CENTRES
Storage
cost
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

28.  These expenses are incurred
to support the operation of
the warehouse.
WAREHOUSE COST CENTRES
Operations
cost
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

29.  Types of cost:
 Management costs (ratio)
 IT systems
 Supervisor
 RFID
 Electrical, plumbing,
structural
 Tracking mechanisme:
 $ per pallet processed
 $ per pallet stored
 $ per kg month
WAREHOUSE COST CENTRES
Operations
cost

30.  General management, non-
operating staff and general office
expenses are examples.
 Tracking mechanisme:
 $ per pallet processed
 $ per pallet stored
 $ per kg month
WAREHOUSE COST CENTRES
Administrative
cost
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

31. ROLE OF UTILISATION
ROLE OF UTILISATION
“UTILISATION”
=
USAGE
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

32. ROLE OF UTILISATION
Space utilisation
 Fixed cost per unit increases
 Variable cost not optimised
Example: store 12 pallets

33. ROLE OF UTILISATION
Space utilisation
 Focused on one area
 Variable costs can be optimised Stacking
Example: store 12 pallets

34. ROLE OF UTILISATION
864 can be
stacked on one
pallet
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

35. ROLE OF UTILISATION
Can we stack
more?

36. 864 mugs 1,280 mugs 2,024 mugs
 The original “Bang” mug was re-
designed twice (ref: http://www.clt.astate.edu/)
 Handling and shipping cost  60%
ROLE OF UTILISATION
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

37. ROLE OF UTILISATION
Workforce utilisation
 Redundant workforce?
 Peak and low season?

38. ROLE OF UTILISATION
Costing analogy of hotel and apartment
Empire Hotel:
RM920 per day
Subang Avenue:
RM152 per day

39. Costing analogy of hotel and apartment
 A good analogy is the difference between a hotel
and an apartment. When you stay in a hotel, the
price per square foot of space occupied is higher
than the cost of leasing an apartment.
 You pay the premium because you want the
flexibility of occupying the space only on the days
you need it.
 While the apartment may be cheaper, you pay for it
whether or not it is in use.
ROLE OF UTILISATION
Ravindran Raghavan
www.ravi311.com ravi311@outlook.com

40. QUESTIONS?
The superior man understands
what is right; the inferior man
understands what will sell.
Confucius

41. Prepared by:
Ravindran Raghavan
www.ravi311.com
ravi311@outlook.com
THANK YOU