Intralogistics & warehouse optimization: Calculating average storage duration

The turnover time allows us to track how long goods typically remain in the warehouse. Average storage time is a key performance indicator (KPI) that helps us identify fast-moving items and thus optimize their placement within the warehouse. Prioritizing fast-moving and slow-moving items helps us optimize inventory management.

Why optimize the warehouse?

Today's digitized workplace, thanks to innovative control software and automated, networked systems, offers ample potential for continuous optimization of warehouse operations. After all, what good is the best and most modern warehouse if the processes behind it don't function properly?

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Another way to optimize warehouse operations is to establish and expand a buffer stock. Buffer stocks are designed to ensure supply in case of potential shortages, such as during the COVID-19 pandemic.

The advantages of efficient warehouse management, especially in e-commerce, are therefore as follows:

• Increased productivity in the warehouse leads to better competitiveness
• Lower costs due to reduced staffing needs, higher utilization of existing space, and resource-efficient operation of the systems
• High customer satisfaction through fast and precise delivery and shipping
• Optimal space utilization due to high-density storage
• Overview & security thanks to modern software control
• Scalability and flexibility through modularly expandable storage systems

By calculating the average storage duration, we can continually review our storage policy to see if there is still potential for improvement.

The known formulas

Average storage period = 360 days * Average inventory / Annual consumption

or

Average storage period = 360 days / Inventory turnover rate

They should help us to continuously improve (Kaizen).

KAIZEN for warehouse optimization

Kaizen comes from Japanese and stands for “change, transformation for the better”.

Kaizen originated in the automotive industry. More precisely, it comes from Toyota. Japan's economy was in ruins after World War II. The overall economic problems also affected Toyota. The goal was to use a recurring method to continuously improve not only products, but also processes, structures, and people. Investments are made in machinery, which is then depreciated and eventually scrapped. New products arrive. Processes and structures remain. Employees also remain. Therefore, it makes sense to continuously improve the skills of workers and employees and to utilize their knowledge, experience, and performance.

Kaizen is also gaining increasing popularity in companies and organizations from other sectors. For example, Kaizen is used in logistics, especially in intralogistics.

Kaizen pursues several goals. A key objective is increased customer satisfaction, as customer acquisition is more expensive than customer retention. To ensure customer satisfaction, four factors are paramount:

• Cost reduction
• Quality assurance
• Speed ​​(time efficiency)
• flexibility

Proponents of the Kaizen method assume that the current state is in need of improvement and that continuous work is necessary to improve it.

Furthermore, changes in the area of ​​employee relations are desired. Their commitment should be ensured through continuous training, and internal hierarchies should be adapted so that every employee can participate.

The Kaizen philosophy advocates for the strong involvement of all areas of a company in the continuous effort to create a better working environment for everyone involved through process improvements, which in turn should guarantee the highest product quality. The goal, therefore, is to implement continuous improvement in all areas.

Calculation of the average storage period

By calculating the average storage duration, we can:

• increase efficiency
• reduce storage times
• Keep capital commitment low

Use our Xpert.Plus service for your intralogistics and warehouse optimization

Xpert.Plus is a project of Xpert.Digital. We have many years of experience in supporting and consulting on warehouse solutions and in logistics optimization, which we combine under Xpert.Plus in a large network.

I would be happy to serve as your personal advisor.

You can contact me by filling out the contact form below or simply call me on +49 7348 4088 965 (Munich) .

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Xpert.Digital – Konrad Wolfenstein

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