Combating Logistics Waste in Warehousing and Supply Chain Logistics

Learn about the different types of logistics waste, how they impact business operations, and what can be done to minimize waste across supply chain sectors

Waste is all around us, but have you ever stopped to think about the concept of “waste” in terms of supply chain and logistics? We may automatically visualize excess packaging materials leftover on the warehouse floor. However, waste is much more complex than that. For example, it also refers to inefficient motion due to poorly designed warehouse facilities as well as delays in processes that lead to idle time for workers.

In today’s interconnected business landscape, efficient supply chain management is crucial for businesses to maintain a competitive advantage. Third-party logistics providers play a vital role in business operations by offering specialized services that assist businesses in managing their warehousing, transportation, and distribution requirements. However, logistics waste continues to pose significant challenges within 3PL operations and the larger supply chain.

In this blog post, we will delve into the various forms of waste across value chain sectors, their impact on businesses and the environment, and the solutions that can be implemented to minimize waste.

Understanding The Types of Supply Chain Waste

Waste is a prevalent issue that affects the efficiency and effectiveness of warehousing and supply chain operations. To address and reduce waste, it is crucial to first understand its various forms and the factors that contribute to it.

Defective and damaged products

Quality depends on doing it right the first time. Producing defective parts or products that do not meet quality specifications results in rework and scrap, adding to manufacturing costs. In addition, products that are damaged during storage, handling, or transportation can result in financial losses and cause a reduction in customer satisfaction. Furthermore, deliveries that do not include each item located on order invoices add to supply chain waste because resources must be utilized to re-fulfill the order.

Packaging waste

Excessive, non-recyclable packaging materials are a growing problem. From one-way pallets and disposable carboard boxes to plastic wrap, packaging can generate high volumes of waste that must be landfilled, dumped into oceans, or recycled. Consequently, the effort to clean up and recycle this waste contributes to an increase in carbon emissions.

Datex Fast Fact

According to the United Nations, approximately 36% of all plastics produced are used in packaging. In addition, nearly 85% ends up in landfills or as unregulated waste.

Excessive inventory

Excessive inventory consists of products that have become outdated or obsolete. These extra products take up available space, leading to increased storage costs. Additionally, excessive inventory can cause issues such as increased lead-times, extra product handling, and more paperwork.

Causes of excessive inventory

Faulty demand forecasting techniques

Using a push production system

Ineffective warehouse management systems

Datex Fast Fact

In 2022, products were inventoried on average 33 days longer than during the onset of the last recession in 2007.

Overproduction

Overproduction typically happens when a business manufactures more products than a customer wants or produces ahead of their known demand. This typically happens when businesses produce based on speculative demand forecasting in today’s volatile markets.

This type of waste is costly to a business because it creates inventory that must be fulfilled or stored, which increases work for employees and storage costs. Furthermore, overproduction can result in a business:

Giving the customer more product than a customer ordered
Expediting an order that the customer does not need early

Transportation

Unnecessary transportation refers to the wasteful movement of materials or information through the supply chain that does not add value. For instance, inefficient truck transportation routes typically result in wasted fuel, increased emissions, and more costs. Likewise, unnecessary movement of raw materials and products throughout the warehouse can cause bottlenecks in manufacturing and distribution processes, resulting in increased wait times.

Examples of transportation waste

Restaging products for shipping to move them out of the way when shipments do not go out as sequenced.

Moving products to various locations for further processing.

Transporting the same item multiple times with no change in the item

Datex Fast Fact

According to the Intergovernmental Panel on Climate Change, transportation accounts for approximately 23% of global energy-related greenhouse gas emissions

Excessive waiting times

Waiting occurs when someone in the value chain waits to take the next action in the process. This can lead to increases in idle time for workers, equipment, and resources, which is not cost-effective. This waste also causes bottlenecks in workflow which can lead to service failures, such as delays at fulfillment networks that result in delayed delivery of products.

Some causes for waiting

Machinery or system downtime

Faulty resource planning

Unplanned work allocation

Insufficient workforce

Faulty communication techniques

Overprocessing

Overprocessing refers to the performance of redundant tasks and processes that consume time, resources, and do not add value to a business’s product or service. Additionally, customers do not typically value or want to pay for these tasks.

Some causes of overprocessing

Duplicate data entries

Back and forth flow of queries related to the same documents

Re-work caused by human error

Underutilized employees

This form of waste is a result of the poor allocation or management of labor resulting in wasted talent, capacity, and increased costs.

Employees are the most crucial factor in how a warehouse operates. If a company does not train its executives to utilize its employees to their highest ability, employees could develop low morale. This could negatively impact workforce production output, which can lead to injuries and other costly production and fulfillment mistakes.

Inefficient motion

One of the most important functions of warehousing is to get products stored, picked, packed, and shipped as rapidly as possible. However, inefficient motion can hinder the order fulfillment process.

Inefficient motion refers to the movement of people or tools in which value is not added. For instance, poorly designed storage and fulfillment warehouses can result in workers bending, stretching, or walking too far. This slows the process of storing inventory, increases order completion times, and can negatively affect the safety and health of employees by increasing the risk of injury.

Many businesses utilize advanced technologies to mitigate useless motion of employees. Often powered by the Internet of Things (IoT) and connected to warehouse management systems, these business tools improve how a warehouse worker completes their tasks. For instance, 3PL warehouse workers may utilize smart glasses and autonomous mobile robots to speed the fulfillment process. These machines will also improve warehouse safety because they limit the amount of movement required to have workers complete a task.

Other examples of inefficient motion in warehousing logistics and supply chain operations include:

Unloading and reloading the same shipment
Backtracking picking and packing processes in a distribution center to fill orders

Reaching or walking to get materials for each item rather than having materials come to workers
Repetitive movements that can cause injury

The Impact of Logistics Waste on Warehousing and Supply Chain Operations

In today’s quest for sustainable global supply chains, logistics waste has far-reaching consequences for businesses, the environment, and society. Let’s look at some of the most important impacts that affect global supply chain performance.

Economic Impact

Waste in logistics directly influences a company’s bottom line by increasing costs and reducing overall efficiency. For instance, damaged products must be replaced or repaired, leading to higher expenses and reduced customer satisfaction. Excess inventory often ties up capital and necessitates additional storage, resulting in increased warehousing costs. Moreover, wasted time and resources due to inefficiencies can hinder a company’s ability to meet customer demands and maintain a competitive advantage in the supply chain.

Environmental Impact

Logistics waste also contributes to various environmental concerns. For example, packaging waste ends up in landfills, contributing to pollution and resource depletion. Inefficient transportation results in higher fuel consumption and greenhouse gas emissions. Furthermore, energy-intensive processes like overprocessing and underutilized resources contribute to an increase in carbon footprint, negatively impacting the overall warehousing and supply chain sustainability.

Social Impact

The social impact of logistics waste can manifest in several ways. For instance, excessive waiting times and overprocessing can lead to worker dissatisfaction, increased stress, and reduced productivity. Additionally, pollution and greenhouse gas emissions resulting from waste have adverse effects on public health and contribute to climate change, which disproportionately affects vulnerable communities.

The Importance of Addressing Logistics Waste in Warehousing and Supply Chain Operations

Logistics waste is a pressing issue that affects the efficiency, effectiveness, and sustainability of warehousing and supply chain operations. Addressing waste is essential for businesses to maintain a competitive edge, improve customer satisfaction, and reduce their environmental impact.

Cost Reduction and Increased Competitiveness

Reducing waste in logistics operations leads to lower operational expenses, and this directly impacts a company’s bottom line. For 3PLs, reducing warehouse operating costs has the benefit of enabling it to pass these cost savings on to its customers. Third party logistics providers that can offer lower rates are better positioned to win and retain customers. These customers are then in a better position to pass along these savings to consumers, contributing to lower costs in the economy.

By minimizing waste, businesses can save on costs associated with damaged products, obsolete inventory, unnecessary transportation, and underutilized resources. Improved efficiency and cost reduction enables companies to remain competitive in their target market, while also boosting profitability.

Enhanced Customer Satisfaction

Addressing logistics waste contributes to improved product and service quality. By reducing the occurrence of damaged products, delays, and inefficient processes, businesses can deliver products and services that meet or exceed customer expectations. Satisfied customers are more likely to become loyal, repeat customers and are more likely to refer new clients, ultimately leading to increased revenue and market share.

Environmental Sustainability

Logistics waste has significant environmental implications, including pollution, resource depletion, and greenhouse gas emissions. By addressing waste issues, companies can decrease their environmental footprint and contribute to a more sustainable future. This includes implementing sustainable packaging, optimizing transportation routes, and reducing energy-intensive processes. Demonstrating a commitment to environmental sustainability can also enhance a company’s reputation and appeal to environmentally conscious customers and partners.

Datex Fast Fact

Sustainability is important to nearly 8 out of 10 consumers. Of that number, over 70% said they would pay 35% more for brands that are sustainable and environmentally responsible.

Improved Employee Morale and Productivity

Tackling logistics waste can have a positive impact on employee morale and productivity. By streamlining processes, reducing waiting times, and improving communication, employees can work more efficiently and effectively. Additionally, when employees see that their company is committed to addressing waste and improving operations, they are more likely to feel motivated and engaged in their work. A productive and satisfied workforce can drive innovation, enhance customer service, and contribute to overall business success.

Compliance with Regulations and Standards

Many industries are subject to regulations and standards that aim to reduce waste, minimize environmental impacts, and promote sustainability. Addressing logistics waste helps companies comply with these requirements and avoid potential fines or penalties. Furthermore, adhering to industry standards can improve a company’s credibility and reputation, attracting customers who prioritize responsible business practices.

Datex Fast Fact

According to McKinsey & Company, by 2050 consumer-packaged-goods (CPG) companies must reduce their greenhouse gas emissions by 90% to help achieve global climate goals

Social Responsibility and Positive Brand Image

Addressing logistics waste demonstrates a company’s commitment to social responsibility and the well-being of the communities in which they operate. Reducing waste can have positive effects on public health, climate change, and the equitable distribution of resources. Companies that prioritize waste reduction and sustainability can build a positive brand image, attracting customers, partners, and investors who share similar values.

Strategies for Minimizing Waste in Warehousing and Supply Chain Operations

Effectively addressing logistics waste requires a proactive, collaborative approach that involves all stakeholders in the supply chain. Here are some strategies that can help minimize waste in 3PL warehousing and the broader supply chain.

Lean Management

Lean management principles focus on identifying and eliminating waste in processes, improving overall efficiency, and reducing costs. By adopting lean practices, companies can streamline their operations, minimize non-value-adding activities, and optimize resource utilization.

Lean tools and techniques that can be applied to supply chain logistics include value stream mapping and Kaizen. Implementing lean management within manufacturing and warehousing operations can significantly reduce logistics waste.

Datex Fast Fact

Kaizen is a compound of two Japanese words that together translate as “good change” or “improvement.” Kaizen is defined as an approach to creating continuous improvement based on the idea that small, ongoing positive changes can reap significant improvements.

The Lean Institute and the Toyota Production System have defined the following process for implementing lean techniques:

Look through the Eyes of the Customer – Understand a product’s value proposition as the end customer sees it. What does the customer really want? Achieving the value that the customer desires constitutes effectiveness.

Eliminate Process Waste – Identify and evaluate all the processes in the supply chain for each product, eliminating all activities and processes that do not add value. Eliminating waste equals efficiency.

Eliminate Wasted Time and Space – Eliminating wasted time and space between the value-added processes improves the flow to the customer.

Repeat – Continuously revisit these steps until a state of perfection is reached in which the right value is created with no waste. Lean companies follow a continuous cycle of “Plan, Do, Check, Act.” However, in our constantly changing world, no one ever really achieves perfection.

Warehouse Optimization

Optimizing layout and improving inventory management processes are important warehouse solutions that can significantly reduce waste associated with warehousing and storage facilities.

Right-sizing inventory levels will free up warehouse space, reduce inventory storage costs, and minimize the risk of product damage. Additionally, enhanced product demand management can improve a business’s responsiveness to customers as well as reduce the chance of products being out of stock, while also reducing the costs associated with overstocking.

Implementing a warehouse management system (WMS) to improve inventory tracking, order processing, and labor management

Leveraging advanced technologies such as automated storage and retrieval systems (AS/RS) and mobile racking systems to utilize warehouse space more efficiently
Employing just-in-time (JIT) inventory management to reduce excessive inventory and carrying costs
Automating repetitive tasks, such as picking and packing, to minimize errors and save time

Data-Driven Decision Making

Utilizing data analytics can help companies identify inefficiencies and areas for improvement within their warehousing and supply chain operations. By analyzing data on inventory levels, transportation routes, and delivery times, businesses can make informed decisions that minimize waste and improve overall performance. Data-driven insights can help optimize warehouse logistics, improve demand forecasting, and streamline communication across the supply chain.

By implementing digital technologies such as artificial intelligence and machine learning to predict demand, businesses can gain greater visibility into their supply chains. In doing so, businesses are better able to make decisions that are centered around the needs of their customers.

Datex Fast Fact

Data-driven decision making is especially important to reducing waste across the food supply chain.

According to the United Nations, global food loss during production and transportation has been reduced from 30% to 10%.

Collaborative Partnerships

Establishing strong relationships with suppliers, 3PL providers, and other stakeholders in the supply chain can help reduce waste and improve overall efficiency. Collaborative partnerships enable better communication, improved visibility, and shared responsibility for waste reduction. By working together, companies can identify and address inefficiencies, streamline processes, and ensure that all parties are committed to minimizing waste and improving performance

Sustainable Packaging

Sustainable packaging made from bio-degradable material can reduce waste. However, sustainable packaging applies to more than just reducing physical waste, making it an important shipping solution. Without proper packaging, products can be damaged while in storage or while in transit. As a result, these products will need to be returned, replaced, and reshipped to customers. This creates more greenhouse gas emissions and wastes a business’s time and money.

Many businesses are implementing smart warehousing solutions to reduce waste. These solutions utilize artificial intelligence to select packaging types and sizes, resulting in less packaging waste, a reduction in damaged products, and faster and more efficient delivery.

Examples of sustainable practices to reduce waste include:

Using recyclable or biodegradable packaging materials
Optimizing packaging design to reduce material use and minimize damage during transportation
Consolidating shipments to reduce the number of trips and lower fuel consumption
Utilizing energy-efficient vehicles and alternative fuels for transportation

Datex Fast Fact

In 2022, the global green packaging market was valued at $223.97 billion. It is expected to reach $325.70 billion by 2028.

Employee Training and Awareness

Educating employees about the importance of waste reduction and providing them with the tools and training necessary to identify and address waste can lead to significant improvements in warehousing and supply chain operations. Employee training should cover topics such as lean management principles, best practices for inventory management, and proper handling of materials to prevent damage. Encouraging a culture of continuous improvement and open communication can empower employees to actively contribute to waste reduction efforts.

Conclusion

Logistics waste in warehouse facilities and supply chain operations can have significant economic, environmental, and social consequences. By implementing strategies such as lean management into how a warehouse operates and undergoing data-driven decision making, companies can effectively reduce waste and improve overall efficiency. This, in turn, leads to cost savings, improved occupational safety and health of employees, and a reduced environmental footprint. Each of these contribute to a more sustainable and successful business.

The importance of addressing logistics waste cannot be overstated, as it plays a critical role in improving the efficiency and sustainability of warehousing and supply chain operations. By tackling waste issues, businesses can reduce costs, enhance customer satisfaction, minimize environmental impacts, boost employee morale, and demonstrate social responsibility. Embracing waste reduction initiatives and sustainable practices is not only beneficial for companies but also for the environment and society as a whole.