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Where opportunities are hiding within Warehouse Management — and how to take advantage of them
The global warehousing market is immense, rather like the structures themselves. In 2023, its estimated value was over a trillion dollars (that’s trillion with a ‘tr’), with growth expected at a CAGR of over 8% between 2024 and 2030.
As a sector, it’s huge, it’s dynamic, and yet somehow, the true importance of effective warehouse management can fly a little below the radar. Too often, it’s the unsung hero of an organization’s supply chain – only visible when there are disruptions in inventory levels or operational efficiency.
Failure to recognize warehouse management as the key for successful supply chain management risks missing the mother of all commercial opportunities.
Supply chains are one mega-process made up of lots of connected micro-processes, and warehouse activity is at the very heart of this network. Warehousing lies at the intersection of customers and suppliers, of production and fulfilment, of transportation and storage. It impacts nearly every business function and influences many core strategic KPIs, such as cost, revenue, productivity, and customer satisfaction.
All of which means, the warehouse operation arena offers a potential goldmine of value opportunities. In this post, we’ll take a look at the breadth of influence warehouse management can have on commercial performance, and examine how Process Intelligence can help realize the potential hidden in its processes.
Ensuring continuity and delivering on KPIs in warehouse management
The modern warehouse is a fusion of heavy industry and high tech. Any lingering impression of warehouses as static, drafty old storage sheds should be consigned to the past. Warehouse management is an evolving environment constantly adapting to meet inventory and distribution requirements.
Whether it’s a single unit or multiple warehouses, company-owned or 3PL operated, every aspect of warehouse operation is designed to ensure a fast, careful, specifically regulated, uninterrupted, and secure flow and storage of goods. Achieving this requires multiple overlapping,interacting systems and processes to monitor and control warehouse activity, inventory accuracy, and resource deployment. The scope of warehouse management spans multiple business flows, with direct impact on the achievement of strategic KPIs.
Here are just some of the ways warehouse efficiency contributes to overall performance (and survival).
Business continuity and minimizing risk
Supply chain volatility has rarely been out of the news in recent years. Disruptions and delays have become commonplace, from the procurement of raw materials right through to the distribution of finished goods. This has placed a lot of strain on the balance sheets and business models of the many organizations that rely on friction-free global trade.
Warehouse management keeps businesses running, quickly offsetting the impact of shifts in the customer environment, the supplier environment, global geopolitics, and local distribution issues, so the flow of goods isn’t interrupted. This is achieved through carefully orchestrated inventory control.
For example, during times of clear supply chain vulnerability, such as the post-pandemic period or the current Red Sea challenges, some organizations might seek to adjust the volumes of goods and materials they store (and where they store them). Tactics to minimize inventory holding, such as just-in-time models and cross-docking, can be de-risked by bringing in ‘just-in-case’ stock or materials.
Warehouses become the buffer zone, the protective wrapping around supply chains that keeps shelves full, manufacturers’ plants operating, and e-commerce operators in business.
But these types of inventory management decisions have major financial implications. Transport, storage, packing and shipping space all come at a cost. Acquiring and storing buffer stock is expensive, requiring meticulous warehouse space and yard management in order to keep a free flow of goods in and out.
Finding the sweet spot between business continuity and optimized costs is a critical task in warehouse management.
Productivity, revenues and customer satisfaction
Well-run warehousing adds significant value – not just to an organization’s supply chain management function, but to business as a whole. Carefully-tracked and securely-stored inventory, maintained in optimum condition and handled efficiently (whether by human or robot), boosts the bottom line and enhances customer relationships.
Efficient warehouse management – including use of warehouse space, personnel, equipment, processes, and systems – optimizes operations and reduces costs. It ensures the right goods or materials are in the right place at the right time in the right quantity. And this prevents any unplanned manufacturing plant floor downtime, empty shelves, or disappointed customers, while simultaneously optimizing labor and storage costs.
Streamlined warehouse processes minimize delays, help ensure fast, accurate fulfillment of customer orders, and minimize delivery errors. They require accurate monitoring and management of inventory levels to avoid stockouts (as well as costly excess stock prompting unwanted discounting). Orders delivered on-time and in-full (OTIF) are table stakes in modern commerce. They are crucial to customer satisfaction, retaining business, and profit generation. Where orders aren’t fulfilled as promised, customers find alternative vendors in the blink of an eye.
At the same time, the role warehouse management plays in enhancing customer experience doesn’t stop at OTIF. An organization’s warehouse operation is typically the hub of its reverse logistics processes (such as customer returns management and the evaluation of returned goods for resale, refurbishment, or disposal). This is a significant driver of revenue protection, particularly for the retail industry which experiences huge volumes of product returns (U.S. consumers returned 16.5% of the goods they purchased in 2022, for example). And, naturally, an easy returns process also feeds into a positive customer experience.
Managing cash flow
When you think about warehouse management, activities like order management or inventory tracking might spring to mind. But warehousing can also play a crucial role in helping manage the cash flow of organizations that import or export their goods across international borders.
Warehouses offering bonded storage can enable the strategic temporary deferment of import duties or VAT payments on many goods until they are released for domestic use or re-exported. This has huge implications for control of operational cash flow – particularly in a tough trading environment of high costs and low disposable incomes. Rather than having to pay import duties for all imported inventory all at once, organizations can spread the financial burden by bringing the goods in from the warehouse (and paying the duties) according to immediate operational needs.
How Process Intelligence can optimize warehouse management
While they may look somewhat uniform from the outside, there’s no such thing as a standard warehouse, as any warehouse manager will tell you. Whether port-centric or inland, each one is tailored to suit its inventory, its customer base, its value-add services (from cross-docking and e-commerce order management, to order consolidation and product mixing), and its product flows. Similarly, levels of warehouse automation and numbers of warehouse staff will not only vary, but likely evolve over time.
However, they do all have two things in common:
An unrelenting requirement for efficient, optimized operations to deliver quality service.
The complex tapestry of systems and processes required to achieve point #1.
This second point is understandable, given the challenges inherent in accurately tracking, securing, and handling an ever-changing inventory of goods and materials that could easily comprise tens (or even hundreds) of thousands of units. It’s also where Process Intelligence enables users to discover significant new value opportunities.
Why current tools and platforms aren’t cutting it for warehouses
As goods are unloaded from multiple sources, then registered, processed, stored and redistributed, there has to be a seamless flow of information to and from multiple transport management systems (TMSs) to and from the warehouse management system (WMS).
In order to provide a holistic understanding of business performance, outputs from these technologies — as well any warehouse process not captured by the WMS solution —also need to be integrated with organizations’ other ERPs and supply chain management, finance, and CRM platforms.
For warehouses to operate at optimum levels, every process has to line up, meaning every system has to play nicely with each other. Sadly, that’s not always the case.
Very often, data from third-party systems or legacy technologies is difficult to integrate. This leaves supply chain leaders with incomplete insights into the impact of business functions on warehouse KPIs, and warehouse management’s impact on core business KPIs.
Complicated issues call for comprehensive solutions, and offerings like business intelligence tools aren’t up to snuff for warehouse management needs — insights are typically limited to retrospective performance reporting, rather than any root cause analysis or suggestion of opportunities for improvement.
“A BI tool is fundamentally different from our Process Intelligence platform”, says Alejandra Quinones, Product Marketing Manager, Supply Chain and Inventory Management at Celonis. “Where a BI solution pulling data from the WMS system might highlight, for example, that warehouse picking times are falling behind target, Celonis would pinpoint exactly where, why — such as an issue with goods receipts not being posted — and the processes that require modification to fix it.”
How Celonis Process Intelligence works for warehouse management
Celonis isn’t a BI tool — it’s a platform that goes beyond the limited visibility and actionability offered by other solutions. Being totally system-agnostic, the Celonis Process Intelligence Platform can integrate data from any external TMS and WMS software with internal systems and process data from across an organization’s entire tech stack, consolidating it into a single, simple interface.
The Platform then generates digital twins to show how warehouse management processes, and those from the wider business, actually run and interact. And by layering in detailed process knowledge from thousands of previous deployments with advanced AI analytics, the system can:
Identify process pinch points and value opportunities stemming from or impacting warehouse performance
Suggest viable solutions for process improvement
Simulate the impact of corrective intervention on business KPIs
Identify and orchestrate process automations
Measure the performance of, and compliance with, revised warehouse processes
The short version? With Celonis, any processes that touch warehouse management, anywhere in an organization’s supply chain and wider business, enter a cycle of continuous improvement — so no matter how volatile the trading environment is, or how disrupted supply chains become, warehouse management processes can evolve to meet the challenge.
For more information on how Celonis can help drive your supply chain transformation, check out our dedicated Inventory Management and Order Management solutions, or dig into how logistics giant DHL improved its warehouse performance with Celonis.
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