Introduction:
For warehouse managers and CFOs, the balance sheet tells a story: rising labor costs, missed shipments, overtime hours, and shrinking margins.
Often, the root cause isn’t a lack of effort; it’s hidden inefficiencies inside the warehouse.
In the 30+ years we have been working with distributors, we’ve seen five recurring cost traps that quietly drain profitability.
The good news? Each can be fixed with the right visibility and technology.
Here are the five hidden costs inside your warehouse—and how to eliminate them.
1. Manual Workarounds That Add Up Fast
The Pain: From spreadsheets to clipboards, manual processes eat into time, accuracy, and labor. What feels like “just a few extra minutes” becomes hundreds of hours annually. The Fix: A modern Warehouse Management System (WMS) automates tasks like inventory counts, order routing, and picking, freeing your team to focus on higher-value work.
2. Inventory Inaccuracies
The Pain: Inaccurate counts lead to stockouts, backorders, and unnecessary rush orders. CFOs feel it in excess carrying costs and lost sales.
The Fix: Real-time visibility through platforms like Infor CloudSuite Distribution or Tecsys WMS ensures inventory data stays synchronized across every channel.
3. Excess Labor Costs
The Pain: Warehouses often overspend on overtime, seasonal hiring, or temporary labor to hit deadlines.
The Fix: Automation tools like Locus Robotics reduce walking time and improve pick rates, enabling the same workforce to handle more orders – without additional headcount.
4. Space Utilization Woes
The Pain: Poor slotting and inefficient layouts cause wasted space, bottlenecks, and slower fulfillment times. CFOs see this as higher facility costs per order.
The Fix: With proper WMS analytics, warehouses can reorganize storage, optimize slotting, and even delay costly facility expansions.
5. Poor Reporting and Lack of Visibility
The Pain: Without accurate reporting, managers are forced into reactive decisions—guessing instead of forecasting. CFOs lack the data to model long-term ROI.
The Fix: Distribution-focused ERP and WMS platforms deliver dashboards and KPIs that track fulfillment accuracy, cost per order, and overall efficiency in real time.
Conclusion
The difference between a warehouse that drains profits and one that fuels growth often comes down to eliminating hidden costs. With the right mix of process improvements, automation, and industry-specific software, distributors can turn efficiency gains into measurable bottom-line results.
Ready to uncover the hidden costs in your warehouse? Contact Sequoia Group for a complimentary Distribution Audit.
