WAREHOUSE SPACE tends to pose major challenges with steel businesses involved in manufacturing, fabrication and building. Many businesses require warehouse space to meet demanding customer requirements. In the quest to meet these requirements and expectations, warehouse space is over used and extended. This often results in cash flow pressure and profit leakage. Investing in the right type and amount of warehouse space will ensure the range and scale works your steel business pursues will deliver profit and increased cash flow. In addition ensuring cash is optimised and working for your business – valued by your customers with the right investments in warehouse space, people, processes, inventory and equipment.
The Steel Efficiency Review® process recommends operations and productions teams to make what the customer wants when they want it, as specified. WAREHOUSE SPACE when not managed effectively can cost steel businesses’ money, time and opportunities to win new work. These costs can amount to a considerable sum over time.
COMMON CAUSES OF WAREHOUSE SPACE ISSUES:
- Pool Warehouse Layout
Poor warehouse layout and lack of balance in the workflow can cause inventory to build up before or after different processes. This helps hide inventory in each step of the production process. The outcome is not favourable for steel businesses resulting in poor use of warehouse space, cash and exceeding pressure on funds.
- Making or Ordering More Stock Than Is Required
Simply ordering and making more than the customer wants leads to working capital issues and unnecessary stock piling. A direct link to the misuse of warehouse space, excess inventory and over-production is found where there is a distrust of suppliers and their ability to supply what is needed leading to ordering more and producing more stock. So businesses order and make more than needed. This ties up cash in stock not required – bleeding the business of profit and new opportunities for work.
- Inaccurate Information
Working to inaccurate sales forecasts and guessing what customers will want in the future can invariably cause stress to many operational environments. The wrong products can be ordered and produced in excess burning cash and disappointing key customers at the same time. This can sometimes promote excess inventory practices – promoting purchasing and operations teams to build stock buffers and completely misuse WAREHOUSE SPACE. This creates working capital issues with funding not being directed to the right activities.
- Unstable Schedules
There is a distrust of suppliers and their ability to supply what is needed. So businesses order more than needed. When the stock piles up the issue is then WAREHOUSE SPACE. Saving on warehouse space leads to the review of associated wastes such as excess inventory, over production, motion and transport.
Our SER® consultants have recommended the following 3 key value proposition solutions to help SAVE ON WAREHOUSE SPACE:
- LAYOUT AND FLOW IMPROVEMENTS TO ELIMINATE BOTTLENECKS
Warehouse layout and flow needs to be balanced to ensure production processes work in sync to not unnecessarily build up stock. It is not important to run every machine as fast as it can be run to make things as quickly as the customer wants them, no faster. A Kanban system or a JIT (Just In Time) delivery approach can be used to help ensure processes are balanced to prevent the build up of inventory – saving warehouse space and reducing working capital.
- ABILITY TO SOURCE HIGH QUALITY RAW MATERIALS (SEMI-FINISHED)
By making end products with semi-finished feedstock, working capital and warehouse space can be reduced significantly. This will allow steel businesses involved in manufacturing, fabrication and building to remove the main cause of excess inventory, motion and transport. Working with high quality semi-finished material will enable stock to be produced quickly – removing non-value added processes. This requires trust in customer requirement and correct forecasting.
- OPTIMISATION OF FEED MATERIAL
By investing is smaller material deliveries and providing for quicker lead times where possible; creating optimal coil sizes, pack sizes and packaging – will greatly reduce working capital. By dealing with a reputable supplier will help take the pressure of your workers to make the right decisions for both your business and customer. This will help save on warehouse space – optimising feedstock as needed. Another approach may be to look at Consignment Stock or Customer Specific Stock stored at your suppliers premises and delivered only as needed.
As a supplier of steel and aluminium products, we must continue to strive to find a better way with our customers. The Steel Efficiency Review® aims to provide recommendations to change and improve our customer’s business and at the same time our product and service offer.
Download our State of Market Reports for our insights and learnings after completing 1,011 Steel Efficiency Review® consultations on businesses of all shapes and sizes across Australia. To register for your own FREE Steel Efficiency Review® click here.