How a WMS can help to reduce warehouse costs

Warehouse costs are a business-critical consideration in many industries, from transport and logistics to retail . Managing warehousing processes and the associated expenses is an undeniably complex task, with the need to budget for staffing, technology, insurance, security, and the cost of leasing or maintaining your own premises. On top of all of this, warehousing software may seem like just another outlay – but choosing the right warehouse management system (WMS) can actually generate significant cost savings.

The ability to reduce warehouse costs is in fact one of the most significant benefits of using a WMS . By keeping track of inventory levels, reducing the time it takes to handle and store goods, and minimising errors, investing in a reliable WMS can deliver a substantial, tangible return on investment.

Manual processes in a warehouse lead to inefficiencies and mistakes, which inevitably increases costs for your business. A WMS works to provide better oversight of production, enabling the identification of issues, and accountability, while highlighting areas that require improvement for increased efficiency and better policies.

In this guide, we’ll explore the typical costs associated with warehouse ownership and management and take a closer look at how implementing the right WMS can streamline processes and mitigate potential losses, ultimately helping you to reduce costs in the long run.

• Typical warehouse costs
• Factors that can impact warehousing costs
• How can a WMS reduce warehouse costs?
• Reduce your warehouse costs with The Barcode Warehouse

Once you’re ready to invest in WMS and reduce your warehouse costs, head over to our warehouse management system page to discover a range of options.

Typical warehouse costs

Your organisation’s exact expenditure on warehousing will be influenced by the services you offer – and therefore the specific requirements of your warehouse(s). For example, businesses operating in hospitality may need cold storage environments to keep stock in the right condition, and this will naturally drive up the price of managing a warehouse.

However, in almost all cases, warehouse costs will include outgoings on rent, utilities, repairs and maintenance and staff labour.

Rent or lease

Renting or leasing a warehouse will be calculated by the square footage of the premises. In the UK, you can typically expect to pay between ￡7 and ￡9 per square foot for warehouse rent. However, this figure will vary depending on your location. For example, a prime spot in the south of the UK will cost significantly more than in the north.

Labour

Warehouse labour costs are another contributing factor which can affect your bottom line. In 2024, the average warehouse worker salary is ￡22,859, equivalent to ￡11.72 per hour. Depending on how your warehouse operates, this can equate to up to 65% of your total warehouse fulfilment costs.

Of course, the more labour you require the higher these costs can be. Depending on the size and complexity of your operation, staffing and labour costs can vary greatly.?

Utilities

Utility costs are another unavoidable cost that you will need to take into account. In 2023, we saw a big increase in the cost of utilities. For non-domestic consumers, electricity prices averaged around 30 pence per kWh which was almost double what we saw in the previous years leading up to 2023.

As with the previous points, your utility expenditure will be dependent on the size of both your warehouse and workforce. For larger operations, you can typically expect utility costs to be higher.

Insurance

Often overlooked, insurance is another vital cost you will need to think about. All businesses in the UK require employers liability insurance (EL) . There are also some additional insurance policies you should consider including public liability insurance, contents and portable equipment insurance and professional indemnity insurance (PI).

The cost of these insurance policies will be dependent on things such as the size and nature of your business, so expect these costs to vary per policy.?

Technology and software

Warehouse technology and software can transform warehouse operations by reducing reliance on manual labour to automate processes. However, this is another added cost you will need to factor in.

Of course, for some large-scale enterprises, this is an unavoidable cost and operating without this technology would not be feasible. But for smaller businesses, weighing up these costs is vital for improving your bottom line.

Equipment

Any additional equipment you require will need to be factored into your overall warehouse costs. This includes both the initial costs to purchase and also the ongoing maintenance costs required to keep the equipment working correctly.

Factors that can impact warehousing costs

As we’ve seen, certain warehousing costs are unavoidable and will always play a part in determining the profitability of your organisation. However, there are certain budgetary factors that you can influence with a view to driving overall costs down.

The location of your warehouse

Location is a crucial determining factor for expenses such as rent and labour. As we’ve briefly touched upon, the location of your warehouse has a significant impact on the costs of your monthly rental and lease payments.

Of course, relocating your premises isn’t always possible. However, if you are in the position to commit to a longer lease, negotiating the terms of your lease may be an option to consider. However, this will all depend on your current circumstances and the position of the business.

The size of your warehouse

As we’ve mentioned, warehouse rent and leases are calculated based on the square footage of the premises. The larger the space, the more costly your rent or lease will be.

Optimising your warehouse layout is the best way to ensure you are utilising all the space to your advantage. This can be done by designing an effective floor plan and layout for your storage and order fulfilment facilities.?

In some cases, outsourcing can be a good alternative as this can help to reduce potential overhead costs. Unless you have a particularly large inventory or require the product to be onsite, then outsourcing your warehouse costs could be a good way to reduce risk.

Storage and handling costs

The types of products you store and handle will also have an impact on your warehouse expenditure. For example, if you process products which require a climate-controlled environment, this will have an impact on utility bill expenditure. Similarly, if you have an automated processing system, this will use more electricity compared to a manual processing facility.

These costs are often unavoidable as they must be put in place to protect sensitive goods that you handle. However, there are ways you can optimise these systems for better efficiency, helping to further reduce costs.?

Headcount and labour costs

Depending on the size and complexity of your business, labour costs are another factor which will affect your overall expenditure. More staff means higher labour costs and vice versa.

This factor does not just relate to hiring enough employees. It also relates to attracting and retaining a qualified workforce. Skills shortages put additional pressure on businesses and in recent years has put additional pressure on those within the manufacturing sector.?

This shortage has caused many businesses to adopt or consider adopting automated technology and AI to alleviate the pressure. When using AI-powered automation in a warehouse, it's important to assess the manual workforce and develop a solid strategy. This ensures that you can take advantage of the opportunities created by automation and AI while still properly supporting your workforce.

How can a WMS reduce warehouse costs?

Warehouse management systems allow you to streamline and automate processing stages, including receiving, storing, picking, packing, shipping and inventory tracking. This helps to improve efficiency and reduce errors whilst providing real-time inventory visibility, all helping to further reduce costs. In addition to this, there are also some other ways a WMS can help to reduce costs further.

Optimised warehouse layout

Having a well-designed warehouse layout is crucial for ensuring efficient picking and packing processes. A poorly designed warehouse can increase order fulfilment time which can result in higher labour costs and reduced customer satisfaction.

Warehouse management systems allow you to plan and optimise your warehouse layout according to your product demand. A WMS can help you identify your most popular products, allowing you to store them accordingly. This can help to minimise the time it takes to fulfil orders, further improving efficiency.

Enhances inventory management

Warehouse management systems work seamlessly with inventory management devices such as barcode scanners and RFID technology enabling you to track inventory levels efficiently.

These systems allow you to view your inventory in real time, aiding you with managing, assessing and identifying issues such as excess inventory and locating missing stock.

Poor inventory management can lead to loss of profits and dissatisfied customers, making it harder to attract new customers and retain existing ones. Implementing an appropriate WMS can help you have full oversight and control of your inventory.

Improves labour productivity

Using a WMS, you can easily monitor, inbound and outbound inventory whilst also generating reports. If your staff can easily manage day-to-day operations with ease, this can improve accuracy and efficiency, helping to boost morale and confidence amongst your workforce.

A WMS is particularly useful for aiding your workforce with processes such as the order-picking process and order-receiving processes. Automating your processes reduces the need for manual tasking, leading to more efficient employee productivity and accountability of your workforce.

Reduced errors

Managing your warehouse operations through a WMS can help to reduce costly warehouse mistakes such as mishandling of stock and order fulfilment errors. Not only can these issues reduce customer satisfaction, but they can also result in increased expenditure when attempting to rectify the issue.

Data-driven decision-making

Warehouse management systems give you complete oversight of your stock and the progress of ongoing tasks. This enables you to continuously monitor your performance, as well as track your progress in relation to your goals and targets.

WMS reporting and analytics is an incredibly beneficial tool which can allow you to make data-driven decisions which can help to reduce costs and inefficiencies. By using this information, you can identify areas of improvement, reduce costs, and eliminate inefficiencies.

Reduce your warehouse costs with The Barcode Warehouse

The Barcode Warehouse partners with the leading providers of warehouse management systems to help you optimise and streamline your warehouse operations. Through bespoke recommendations, our expert team can help guide you in choosing the right WMS for your needs. We’ll also consult with you on the appropriate steps for implementation and continue to support you through our full enterprise mobility Managed Services .