The spectre of inflation is very much back with us as UK inflation rates hit 40 year highs. Inflation is considered a significant risk to both the UK and global economy this year, with businesses and consumers all feeling the impact of soaring energy bills, food and raw materials costs. The Bank of England has warned that inflation could reach 11% this year, which is more than five times the 2% target rate set by the government. The rising cost of living is on everyone’s mind and it will undoubtedly be a topic for supply chains to navigate this year.

A recent study by Accenture found that 88% of global executives selected inflation from a menu of potential supply chain concerns and a similar number of supply chain specialists in Europe and North America surveyed by McKinsey also ranked inflation as an economic risk.

Although inflation is a problem for all businesses, those with manufacturing and distribution operations will encounter additional pressures, for example:

Increased inventory costs: if raw materials have become more expensive, this can result in lower profits because someone has to pay. It may not be possible to pass the entire increased cost onto your customers.

Increased transportation costs: during inflationary periods, transportation costs including fuel, shipping and haulage increase. These costs are already at a record high due to Covid-19 disruption and this is further adding to pressures on profits.

Increased wages: there is already a shortage of available workers for warehousing and logistics because of Brexit and Covid-19, which has led to labour costs rising. Inflationary pressures could further increase this upwards trend.

Clearly costs are increasing due to inflation, but warehouse managers can limit many of the adverse effects. Using automation technology like a warehouse management system (WMS), can help minimise inflationary pressures on warehousing and logistics costs. Here’s how:

Store more in less warehouse space

Increasing inflationary pressures in warehouse rental rates due to warehousing shortages mean that every square metre of warehouse space is getting more and more expensive. A best of breed WMS can help you make much more efficient use of your warehousing space with typically up to 20-30% savings. For example, an effective put-away process is an important stock management strategy to maximise space utilisation. There are multiple ways a WMS can automate putaway, by identifying the best place to store items based on available spaces, monitoring how frequently the items will be picked and where they should be placed in the warehouse and whether items need special storage considerations.

Automate routine and repetitive tasks

A WMS will automate many routine and repetitive processes in the warehouse, which in turn helps to minimise labour costs (which can often be up to 50% of warehousing costs), the impact of human errors, congestion, bottlenecks and disruptions, plus it will optimise resource consumption. The potential savings can be very significant. For instance, a WMS can manage order picking processes through a mobile device like a voice headset.

Integrating Processes

One common observation in a warehouse is what we have described as ‘anarchy masquerading as flexibility’. Processes aren’t fully integrated, there are different suppliers and systems in place with a lack of standardisation. Anywhere there’s a lack of integration, there are hidden costs. For example, a company might use a range of different systems to manage parcel shipments rather than having a single integrated and standardised process. The extra costs inherent within a disintegrated process become magnified when inflation is increasing. It can also compromise the quality of data, which in turn negatively impacts sales order entry, planning, production, and customer satisfaction.

Ultimately, supply chains cannot reduce inflation, but depending on the way you manage yours – especially inside the four walls of the warehouse – you can potentially beat inflation. Indigo WMS can help you become super canny about minimising costs, so that your resources can stretch farther, and profits are less impacted.

Whilst no system should be treated as a magic wand a WMS can and is often used as a trojan horse. Potentially allowing better processes and procedures to be implemented as part of the project.

Getting and keeping good people in the warehouse was always hard, this year it’s getting increasingly more difficult and so streamlining the process and reducing the need to have product knowledge when picking in the warehouse is a task well worth the effort.