Month: April 2023

Supplier segmentation merely refers to categorizing or segmenting vendors by analyzing their service and products, so that they can be suitably monitored and managed, and prioritized.

There are different ways in which this can be done, and there is no single method that can be uniformly applied to all models of business.

The complex nature of segmentation necessitates the use of multidimensional matrices in order to account for every possible risk factor and distinct feature.

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What is the Supplier Segmentation Matrix?

The supplier segmentation matrix is drawn up mainly for tasks like negotiating purchase terms and rationalizing the supply base.

By performing segmentation, you can understand the level of dependence on specific vendors, and the expense involved in changing your vendors.

However, there are many other factors to think about like market conditions, performance potential, competition, and others, which make segmentation challenging.

As you work with different vendors, over time, you will become familiar with the characteristics or peculiarities of the important suppliers.

One of the popular approaches is analyzing the supply base by expense or spend, and risk.

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The spend factor refers to focusing on your suppliers essential to your business process, and on whom you are willing to spend time and money.

The risk factor refers to how much potential risk your business has if the supplier fails with regard to product quality, delivery time, issues with warranty, poor service, and so on.

A certain amount of risk is to be expected for any business in every aspect, even vendors.

So what you need to do is recognize the critical risk factors of suppliers that can hamper your business processes; you can use this to evaluate performance and to define preventive measures that can be practically implemented.

Basically, you should aim at identifying which suppliers are the most strategic or critical to your business.

A strategic supplier is one who delivers a value-adding service or product to your business.

If they fail, it is likely to affect your operations, customers, and even your infrastructure negatively.

When your critical supplier doesn’t deliver as expected, you can end up with business disruption, or unhappy customers.

Vendors can be both strategic and critical; segmentation matrices help to kick-off a meticulous process and intra-organizational discussion to identify relevant suppliers who need to be closely looked at, monitored, and so on.

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Why is Supplier Segmentation Important?

Vendors who are essential to your business need to be given more attention.

When you categorize all your suppliers with pre-defined criteria, you can determine how much attention you need to pay them in order for them to keep delivering high-quality products and service.

It can also deliver insights about your vendor base, and tell you the extent to which different vendors are essential to your business operations.

This will also help in creating a better working relationship with your important vendors at every level.

Finally, it becomes easier to identify the level of risk to which your business is potentially exposed by creating a vendor segmentation matrix.

If you depend on just one source to supply certain essential goods or services, and that source fails to fulfil your needs, you may have to stop production or sales, and turn customers away.

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Types Of Supplier Segmentation

Depending on what product or service the vendor supplies, you can categorize them into any of the four quadrants. This approach or matrix is called the Kraljic Matrix.

• Commodity
• Strategic
• Standard
• Key

But the segmentation can also be on the basis of:

• Complexity of product or service
• Money spent
• Volume of goods or services supplies
• Width of the supply base.

Considering these factors, you can categorize your suppliers by:

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1. Spend:

How much do you spend in a year with a specific vendor?

What is the growth of spending year on year?

Maybe you have supplier without a huge spend, but you can plan to widen their scope and put them on the list of potential strategic partners.

2. Innovation/Collaboration:

• Is the vendor offering a unique, customized or generic product or service?
• If you are able to create a breakthrough offering, a new market segment, tap into new markets, or capture a greater market share etc. by collaborating with the vendor

3. Supplier Risk:

This will determine vendor categorization, supply plans, and strategies of sourcing.

You must consider:

• Possible failures which can help you evaluate the level of impact your business may have to face due to supplier failure.
• Actual failures that happened previously need to be studied to see how they impacted business continuity

4. Customer Impact:

Looks at vendors whose products and services let you improve the shopping experience for customers or enhance your customer base substantially, must be prioritized as strategic partners.

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Models of Supplier Segmentation

Let’s now look at 3 models of supplier segmentation.

1) Kraljic’s Supplier Segmentation Model

This is a classic model and it aims to identify the external and internal strategic importance of your strategic suppliers so that you can modify your strategies.

It also aims to help businesses that are undergoing transformation that is economic, technopolitical and environmental in nature.

Strategic suppliers deliver great value, and help to attain long-term goals; they offer industry expertise, manage costs effectively, and may even exceed expectations – and any vendors who fit this bill must be carefully evaluated.

Collaborative or leverage vendors means you leverage purchase volumes with them, as they affect business process financially, by concentrating on overall cost of ownership and reasonable margins.

Then you have custom vendors who supply product that are highly dependent on customers – this means in the event of failure, you could face a huge bottleneck, and run the risk of interrupting supplies: critical element of monitoring performance.

Commodity suppliers are easily replaceable, since their offerings are not very critical to your business process, and necessitate less action.

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Cons

The terms in this matrix are vague, and categorizing the vendors is also not easy.

It’s difficult to quantity risk and impact on profit.

You can spend inordinate amounts of time in defining and quantifying these concepts when you want to categorize for monitoring and measuring performance.

With a single matrix you can display several dimensions to manage and develop suppliers, where the matrix segments vendors depending on their importance – considering levels of commitment and plans to develop relationships with customers.

2) Segmentation for Supplier Performance Management Actions

You are expected to identify how many resources and how much time you need invest in developing and managing supplier relationships together with the procurement expertise levels.

The matrix includes several dimensions like investing in the relationship, strategic importance, focusing on TCO vs supplier dependence, criticality, and difficult of changing vendors.

These actions will differ depending on the type of supplier you select.

This matrix also offers guidelines to focus on managing and measuring supplier performance for various supplier segments, and tackles the issue of requisite experience of supply management teams.

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Here, the strategic and custom vendors are the riskiest, and necessitate meticulous monitoring as they are essential to the business.

Investing in relationships and precise assessments are essential for collaborative and strategic suppliers and involves more exact industry expertise to manage strategic suppliers; custom suppliers need more experienced professionals as for performance management as their failures can cause complete business disruption.

The importance of strategic supplies is showcased through critical values, involvement in business growth, and relationship value.

Collaborative suppliers impact the business operationally and financially and hence it’s imperative that they improve continuously.

It is critical to measure performance for these elements.

Commodity suppliers impact businesses the least if they fail but could have some effect on customer satisfaction, while custom suppliers’ performance has to be monitored as supply continuity is crucial.

To measure performance, you need to focus on the fundamentals of operational performance.

For more strategic relationships between your business and vendors, supplier performance depends more on non-contractible sectors.

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3) Supplier Segmentation Based on Relationship & Potential

This matrix categorizes your vendor base to determine the ideal level of engagement.

This helps to assign resources for sustaining business processes.

The different levels in this matrix are Strategic or Preferred, Emerging or Develop, Maintain, Directed Suppliers, and Eliminate.

• Vendors who have delivered excellent and consistent performance over a period of 24 months, and have the capability to scale
• Vendors who have some unique value proposition
• Legacy suppliers with acceptable performance levels
• Re-sourcing from other vendors may be prohibitive
• Not good enough for future business

Some vendors could be recommended by customers, and in such cases the spend is negotiated by them, leaving you with no leverage.

Suppliers that don’t maintain expected performance levels or don’t have the necessary capabilities should be eliminated from the supplier base.

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Benefits to Suppliers

• Buyers will enter into agreements for longer terms for gaining stability and better planning scope
• Opportunities to develop products in collaboration
• Access to new quotes on bids and technology blueprints
• Can be chosen for proactive supplier development action

Benefits to Your Business

• Full-service supplier capable of delivering design, test and validation services, and increased product value
• Access vendor technology blueprints
• Grow future supply base

Prerequisite Guidelines To achieving ‘Preferred’ classification

• Vendor collaborates with your departments like product engineering, quality, operations, quality development and so on to be on the same page
• 24 months of consistent performance at a minimum
• Satisfies supplier performance metrics
• Strong management
• Financially strong

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To achieve ‘Develop/ Emerging’ classification

• Vendor collaborates with your departments like product engineering, quality, operations, quality development and so on to be on the same page
• Has requisite certifications
• Proper process audit conducted by certified professional

‘Maintain’ Classification

Financially stable average suppliers who don’t stand out in any way

Eliminate

Poor quality, delivery, high cost, etc., and inability to improve their performance, are eliminated.

Using the supplier segmentation matrix is a critical step in designing and deploying a strong business operation. The matrix helps in identifying the elements driving critical value, determine the levels and frequency of appropriate engagement levels, and more.

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Tranquil ERP has a robust procurement management module with a rich Supplier Management feature that will take care of identifying your best and most reliable suppliers so that you don’t have to. This will go a long way in helping you craft a strong vendor and procurement strategy so that you can cut costs, have reliable supplies, and boost your profitability.

 

As a retailer, distributor, or manufacturer, you need to expand your warehousing capabilities and facilities as your business grows.

Today’s consumers are demanding and discerning, and you need to up your game as far as distribution is concerned, and ensure that you implement the latest methods and technologies to be more efficient.

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Latest Trends in Warehouse

Let’s look at some of the warehouse trends for 2023

1. Automation

Conventionally, warehouse operations necessitate a lot of labor.

This can be expensive and time-consuming.

Automation can reduce the need for labor in the warehouse to handle products, minimizing errors and providing enhanced safety to employees and goods.

While this is not exactly a one of the very new trends in warehousing, it is expected to be increase greatly.

Mobile robots, guided vehicles, drones, unmanned forklifts, automated inventory picking, and goods-to-person robots are some of the automation technologies warehouses can implement to boost efficiency.

Today, drones can fly inside warehouses using geolocation and AI to avoid obstacles, and capture inventory images with 2D scanners.

Collaborative mobile robots that ‘learn’ from their human handlers are also now in the market; they handle materials in close and cluttered spaces.

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2. Warehouse Management Systems

Several parties have to collaborate in order to store, track, and transport inventory efficiently.

With each working on their own tasks, visualizing changes in real-time can be difficult; but this problem can be overcome with the help of warehouse management systems that supervise and handle operations from the time of entry of goods into a warehouse till they are shipped out.

WMS leverages AI and big data, delivering analytics that help warehouse managers track performance and optimize processes.

WMS that enables visualization of warehouse processes, monitoring of operation status, and stock keeping management is today available, helping to deliver efficient customer service.

Some solutions also help control inventory, price, delivery etc. across multiple channels.

Modern solutions also use AI-driven BI to deliver inventory forecasts, financial analytics, and more.

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3. Inventory Tracking

When thousands of items keep flowing in and out, all the goods have to be properly tracked by managers so that there is minimal loss of inventory caused by theft and spoilage.

Today several technologies are available to track inventory efficiently, that eliminate possibility of human error and increase supply chain transparency.

Barcoding has limitations, which can be overcome by RFID which is radio-wave based and allows remote reading and detection.

OCR technology creates digital versions of printed documents that can be quickly added to databases, speeding up warehouse processes.

4. Wearables

As warehouse employees work in decentralized environments on tight deadlines, they have to be able to move freely.

This can now be easily achieved thanks to wearable technologies that offer hands-free mobility, and offer detailed information about the warehouse goods.

Smart glasses and gloves and exoskeletons boost productivity of employees by enabling them to carry out tasks with the right posture, and reduce physical effort too.

Smart glasses today feature inbuilt machine learning and AR technology, optimizing picking and improving communication between coworkers.

This is certainly one of the more innovative warehouse automation trends we can expect in this year.

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5. Warehouse Design Modeling and Simulation Software

Ecommerce shoppers are an impatient lot and want their orders as quickly as possible.

To increase speed, suppliers today depend on numerous centers that are connected to one another and are capable of managing a range of customers in clusters.

This is made possible thanks to smart warehouse management.

Warehouse design has become extremely important today, as modeling and simulation software allows managers to visualize what the warehouse needs to look like.

With predictive analysis, a business can optimize the space depending on their inventory requirements.

Tasks like adding new SKUs to the warehouse are simplified.

Simulation can help in strategy formulation without disrupting the day-to-day operations.

6. Predictive and Prescriptive Analytics

Peak season business can be extremely challenging for online sellers.

By using AI and ML algorithms, however, this surge in demand, and requirement for additional labor can be eased.

These systems can churn out prescriptive analysis, based on information collected from earlier behavior of users and events.

Sellers can also see which items sell fast, or the areas where sales are the highest.

It can help inform the high-demand items so that they can be placed closer to loading docks.

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7. Internet of Things

IoT solutions help in optimization and supervision of warehouse processes. Connected sensors track goods anywhere in the warehouse, keeping watch on conditions like lighting, moisture, temperature, and so on.

It makes use of real-time data to manage inventory and facilitate analytics.

The system can inform you if products need to be replaced.

IoT also extract WMS data to render real-time warehouse models, helping managers to locate inventory, visualize operations, simulate layout and workflow changes, and so on.

Private 5G LAN connectivity, tracking beacons, Bluetooth Low Energy technology, etc. simplifies operator task of tracking employees and inventory, and provides connectivity for autonomous vehicles and robots that necessitate real-time computing.

8. Gamification In The Warehouse

Distribution facilities often grapple with the challenge of keeping their employees engaged and happy – only then can they deliver great customer service.

An excellent way to achieve this is through gamification – leaderboards, recognition both individual and team, leaderboards, reward programs, employee feedback, and so on.

These factors are today included in most warehouse management systems and are playing a critical role in the modernization and optimization of retail supply chains.

ALSO READ: Benefits of Warehouse Management System

9. Immersive Reality

Quick delivery of correct products to the correct location within the facility requires trained personnel and effective equipment.

Many warehouses are now including immersive reality solutions to ensure high-level efficiency of employees.

The implementation of new procedures, planning expansion of warehouses, delivery process designing and predictive modeling – all of this can be simplified with AR and VR.

With immersive training driven by virtual reality, you can improve employee skills; optimizing the route to specific items and product searches can be enhanced with the help of augmented reality.

As operations can be visualized better with immersive reality tech, it can help improve decision-making processes.

VR and AR can also be used to train employees on using forklifts, safety procedures, making them understand consequences of wrong methods in real life, and so on.

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10. Warehouse Security

Warehouses store inventory, which has monetary value, and hence, likely to attract unscrupulous persons who may try to steal the goods.

Ensuring security in the warehouse is therefore crucial for owners and businesses.

Warehouses implement a number of security measures like video surveillance, alarms, motion sensors, broken glass detectors, smart locks, and so on.

They are also choosing to shift their data to the cloud, which lets them transmit data across widespread networks.

Data protection and warehousing security solutions protect data from being breached or stolen.

Blockchain is one such technology that helps make supply chain operations traceable and transparent, and help to mitigate the risk of data breach and fraud.

Thanks to cyber risk management systems, warehouses can not only evaluate the potential risks, but also take steps to rectify any gaps in their security.

The total cost of investment in ensuring warehouse security is totally worth it when you consider the possible loss that could happen with data breaches or theft of valuable products.

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11. Sustainable Warehousing

Warehouses generate a tremendous amount of garbage in the course of normal operations.

Waste management has become a pressing issue all over the world, across industries and businesses, and is also very crucial in warehousing as well.

Warehouse owners and managers are moving heaven and earth to minimize the environmental impact of their operations, and making the move towards sustainable or green warehousing.

The use of automated handling is one major step being adopted by warehouses to reduce their carbon footprint.

By using efficient equipment that emits less and is capable of running without lighting, they can cut back on energy spends.

They also seek to reduce, reuse, and recycle packaging material, plastic containers, pallets, and other warehouse articles to bring down the waste generated substantially.

Green warehousing trends recommend frugal and efficient utilization of resources and energy to reduce the climatic impact of the industry.

Sustainable warehouse solutions also include optimizing the capacity and minimizing space required, and scaling as business needs grow.

Compostable packaging and pallet wraps are also making their appearance in the market, and this will significantly help warehouses to reduce waste.

ALSO READ: A Guide To Inventory Stock Valuation

12. Fleet Management

Ensuring safe and effective interaction between employees and equipment helps boost productivity and eliminates safety risks.

Warehouse layout optimization, minimizing forklift accidents, monitoring assets in real time, improving the health and safety of drivers – all of this can be achieved with proper fleet management.

A wide range of warehouse vehicles like forklifts, conveyor belts, mobile robots, AGV, and hand trucks, are part of the fleet.

Downtime can be reduced via telematics solution, and drivers and vehicles can be kept on schedule if you streamline the maintenance processes and automate updates in real time.

Fleet management systems can integrate forklifts and all types of robots on a single platform, provided manual activities are replaced by those robots and vehicles.

It helps in controlling traffic, eases automatic allocation of tasks, facilitates interoperability, affording complete control over the machinery.

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To Wrap Up

Automation is inevitable today in any field; it not only improves safety and efficiency, it also helps in saving money, and delivering better customer services, which eventually translates into higher revenues and more profitability.

All of the above trends can be integrated and implemented via robust warehouse management systems like that of Tranquil ERP.

If you are a warehouse owner and are confused about the best way to go about improving the efficiency in your warehouse, we can show you how you can make it happen. Do schedule a FREE demo of our solution at a time that’s convenient for you, and we will take you through it, and answer all your queries.
Don’t delay – take the first step towards an efficient warehouse now!

The total cost of ownership or TCO refers to the total cost of a product or service across its lifecycle.

It considers all direct as well as indirect costs.

It is an invaluable tool for decision-making, as it offers additional opportunity to create value through optimizing expenses and so on.

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Origins of TCO

Though we can’t be certain, some experts opine that TCO originated in the early 19th century. Engineers assessed cannons for efficiency by analyzing their service life and what repairs were required.

In the late 1990s, the US Department of Defense formalized the approach as they were evaluating the overall expenditure associated with a specific program; eventually, they published a military standard.

Since that time, several companies in the industrial arena adopted this approach to have an accurate production cost calculation, and have a clearer picture about margins and selling prices.

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Definition of TCO

The goal of TCO is to calculate the complete cost of procuring a product or service from a particular vendor, beyond its basic purchase price.

We can define it as the total expenditure incurred in obtaining, utilizing, handling, and withdrawing an asset over its whole lifecycle.

Going by this, TCO brings all the expenses associated with a specific product or service across its entire lifecycle; not just the direct and obvious costs, but also indirect or unseen expenses.

You could say, in a way, that it is the total cost of investment you have made in that product or service.

To determine the TCO of any product or service, it is important to know how it is calculated.

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Calculating Total Cost of Ownership

There are several methods of calculating the TCO, and the method you use will depend on the specific type of product or service you want to calculate it for.

There is no one-size-fits-all solution for calculating TCO.

However, the components are more or less similar across industries.

There are about 8 types of expenses.

Let’s get to know them:

• Cost of purchase – cost price, vendor margins
• Cost incurred like packaging, transportation, import duties, terms of payment, and so on
• Acquisition cost, including operations of the procurement department
• Cost of ownership, like depreciation, stock management etc.
• Maintenance costs, like servicing, replacing worn parts, and so on
• Usage cost – services, operations, value of use, etc.
• Cost of low quality like process that are not in compliance, not complying with deadlines, etc.
• Disposal cost – resale, recycling, retiring, destroying, or disposing through other means

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If we look at company cars ownership, the calculation of TCO considers all the above-mentioned factors.

The cost incurred includes customs duties, transport costs, and so on.

Owning and using vehicles like these means you also have to pay taxes.

This has to be included in the calculation of TCO, and may differ from nation to nation.

You will also have to consider expenses like registration expenses, and possible penalties or bonuses based on environmental sustainability.

This means that the total cost incurred and the benefits derived from owning these vehicles must be compared meticulously, to determine if it is indeed beneficial to own the cars, or whether renting them would be more economical.

There is another way of looking at total cost – Total Value of Ownership.

This approach goes beyond merely looking at costs to make decisions, and to look at the beneficial returns of a product bought or service availed.

Factors like sustainability, risk control, growth, and so on are considered for calculating the benefits – quite similar to the TCO calculation.

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How Total Cost of Ownership Works?

Whenever a business is considering purchasing some assets or investing in certain capital projects, they look at the total cost of ownership.

Companies have the costs related to purchase and the costs related to operations and maintenance listed separately in their financial statements.

The first one – related to the purchase, is a capital expense, and the second is part of operating expenses. Analyzing the ownership cost in its totality, is commonly followed by most businesses.

Total cost of ownership is used by businesses in the long run as a basis to evaluate business deals.

Considering the TCO is a holistic approach, since it examines the purchase from a wider outlook.

The evaluation includes the purchase price paid initially, along with all direct and indirect expenditures.

It is easy to report direct expenses; however, businesses normally attempt to evaluate all the possible indirect expenses that could have a significant impact on influencing the purchase decision.

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How to Use Total Cost of Ownership?

Let us go again take the example of owning a car; the cost comparison matters a lot here.

The total cost of owning a car is not merely the purchase price, but it also includes expenses that the owner has to incur because of use.

Examples are fuel, servicing expenses, spare parts, insurance, repairs, or any modifications or additions made.

The calculation of the total ownership cost is especially important when you are comparing a new car and a used car.

While the purchase cost of a used car is likely to be much lower than that of a new car, its total ownership cost could be much higher.

This is because, as an older car, it may be more susceptible to breakdowns and need more repairs; there will be some wear and tear, and you may need to frequently replace parts; it may not be as fuel-efficient as a new car too.

A new car on the other hand, often has warranties for several parts, so that even if any of it malfunctions, you could get free replacements.

Therefore, a meticulous calculation of the total cost of ownership must be made, and a thorough comparison made, before you make a decision on whether to buy a new car or used car.

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The Challenges of Calculating TCO

Today, numerous methods and software tools are available that help in calculating the total cost of ownership; however, the process is still not perfect, as most businesses are themselves not sure of which method they want to use.

This can be problematic, as purchase decisions cannot be formed on uniform information.

Further, determining the scope of operating expenses for IT equipment is extremely dicey.

There are often hidden costs that one tends to forget, like warranties and depreciation.

Sometimes, incomparable products are compared, and even that can create issues.

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Let’s say that the support expenses on a server includes spare parts costs.

For another server, it only does not include spare parts.

Now a hasty comparison will make it seem that the first server costs more in terms of the support cost.

Analyzing ownership costs usually does not account for unforeseen spikes in the cost over the long term.

Like, the cost of the part that is upgraded has suddenly increased significantly more than what you expected, because your regular vendor did not have it for whatever reason, and you had to procure it from a new vendor.

The calculation of TCO cannot take into consideration factors like change in suppliers, upgrade and service availability, and so on.

If an equipment manufacturer doesn’t stock parts or discontinues a product, or a software vendor discontinues specific functionality or support for a software solution, your business may have to incur unforeseen substantial extra costs, pushing the total cost of ownership much higher than the initial estimate.

Best Practices to Optimize TCO calculations

Corporate managers and those making the decisions regarding purchases, analyze costs of various options and then compare the total ownership costs, to check the cost in totality, and eventually, which alternative incurs the lowest cost in the long period.

The purchase price of a server or license fees for a software solution could be priced much lower than that of a popular or competing one.

Those in charge of purchase will determine how much it would cost to upgrade the server or software, check the cost of annual service contracts and so on to see whether these costs will have an impact on the savings in cost they expect to make.

For example, the TCO of a particular model could be higher than that of another model; however, the benefits it offers may be significantly higher than that of the competing model.

By not performing a TCO analysis, companies could end up with grossly miscalculated purchase budgets, or purchase equipment or vehicles that are not actually suited to their needs.

This could cause slow services, frequent maintenance, unprecedented downtime, and other issues.

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How Can You Reduce Your TCO?

Reducing total cost of ownership is something the decision-makers in procurement attempt to do, to create value for the company.

This is achieved by first calculating the TCO, which considers the elements we spoke about earlier.

The next step is optimization; when we talk about company cars, reducing the total cost of ownership could be related to implementing best practices to reduce fuel consumption and minimize wear and tear so that you don’t have to spend a lot for maintenance and servicing.

When we talk about IT equipment, it could be something like ensuring a dust-free environment to prevent spoilage, and so on.

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Benefits of TCO in a Nutshell

Knowing the TCO of a product or service offers several benefits like:

• Helps in optimizing costs both direct and indirect, leading to less wastage
• Is a bargaining tool to negotiate with vendors
• Helps in analyzing ROI and return on time investment by monitoring important metrics
• Support decisions for outsourcing
• Delivers enhanced financial performance in the long term
• Can help in boosting company profitability when procurement teams are well-versed in calculation of TCO

There is no doubt that calculating the TCO ensures better decision making, lower costs, and more profitability.

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Tranquil ERP has the features and functionality that helps you automate and streamline the process of calculating TCO so that you can bring more efficiency into your operations and earn more revenues. If you’re unsure how this works, do book a FREE demo at a time of your convenience, and we are happy to walk you through our software, and answer any questions you may have.

 

A safety checklist is used in a warehouse to help ops managers to recognize safety hazards, so that they can take the necessary precautions to prevent accidents at the workplace.

With warehouse employees facing numerous problems like very stressful environments, hazardous materials, and repetitive motions, a warehouse safety checklist has become a critical tool of managing safety in the warehouse.

The checklist can help managers ensure that all safety procedures have been conducted according to the safety policies to protect workers, and can also be used to record feedback.

The International Labor Organization reports that over 2.3 million employees have work-related accidents every year; the majority of these take place in the warehousing industry.

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Common hazards faced by employees include:

• Slips and falls
• Exposure to harmful chemicals
• Poor safety training
• Improper communication of hazards
• Poorly designed emergency exits
• Fire extinguishers that are difficult to locate

Remember that if you compromise on safety to save money, you could be seriously endangering the lives of your employees; additionally, you will be violating compliance requirements, and may face hefty fines and litigation.

Warehouse Safety Tips and Best Practices

Though workplace injuries can take place anywhere, warehouses are riskier as there are huge loads, packages, and equipment for lifting and transporting goods, and so on, which employees have to operate.

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1. Forklifts

Forklift trucks are essential in any warehouse facility; but improper usage of this equipment can cause serious harm to their operators – even resulting in death – other employees, and property.

In fact, unsafe use of forklift trucks is the most commonly mentioned hazard in warehouse operations by industry safety watchkeepers.

Therefore, it is extremely important that strict safety provisions are followed in their use.

2. Docks

Workers can get trapped between a forklift truck and loading ramp inside the warehouse – one of the most horrible accidents they can have.

This happens when the truck leaves the dock and rams into a worker.

It is critical that personnel driving the forklift trucks are always alert, and drive slowly.

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3. Conveyors

While these are very convenient to transport goods, they also pose serious injury risks to workers.

Employees can get caught in equipment and even get hit by falling objects.

4. PPE

Protective equipment for employees include safety shoes, hard hats, gloves, goggles, ear muffs (if environment is noisy) bright and high visibility jackets, and overalls that protect against mechanical and electrical hazards.

It is essential that warehouse workers are provided with whatever is required from among these for their safety.

Apart from these, it is vital that warehouses are regularly inspected so that problems can be identified before they blow up and cause damage.

Any leaks, cracks, and breaks should be immediately fixed.

No trash or debris should be allowed to accumulate anywhere.

All loose, dangling wires and cables should be secured as soon as they are noticed.

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All equipment should be regularly checked and serviced, so that minor problems are identified and rectified before big problems develop, and cause loss of life and property.

It is not enough to have safety procedures and protective equipment in place.

These need to be checked regularly to ensure that they are in good working order, and they have to be placed in such a manner that they are easily seen and accessible in emergencies.

Furthermore, you have to ensure that your employees are properly trained on using equipment, and how to evacuate in the event of a fire, and other safety procedures.

The training should be refreshed at regular intervals so that your employees don’t forget what to do during emergencies.

You need to promote a culture of safety by always impressing on your workforce the importance of following procedure, getting certified, and so on for the sake of their own safety and that of their coworkers.

Maintaining the premises in a clean, neat, and hygienic manner is crucial, and may make the difference between a safe and unsafe working environment.

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Warehouse Safety Checklist

Ø Is there any damage to the windows, doors, walls, floors, and ceiling?

o If yes, mention details

Ø Is there any obstruction in the aisles, workstations, and exits?

Ø Are the vehicles in their designated positions?

Ø Are all electrical cords secured?

Ø Check if the following areas are well lit:

o Workstations
o Corridors
o Offices
o Loading docks
o Fire exits
o Lunch room
o Bathrooms

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Ø Is there any trash lying around? If yes, dispose immediately.

Ø Are workstations, break rooms, and washrooms clean and hygienic?

Ø Fire Safety

o Check fire extinguishers – are they in the right positions?
o Are all fire safety systems in working conditions:
o Sprinkler systems
o Fire alarms
o Hoses
o Check for risk of explosion in the event of uncontrollable fire
o Are chemicals stored safely and with fire-retardant covers?

Ø Is the ventilation adequate to ensure freedom from dust for the workers?

Ø Check Signage

o Are all fire exits well lit and with proper and prominent signage that allows them to be located in an emergency?
o Are markers that direct workers towards emergency and fire exits properly spread throughout the site?
o Are all emergency signs properly placed, and big and clear enough to be seen easily in the event of an emergency?

Ø Check Drainage Systems

o Is the drainage sufficient to prevent slips and keep paper dry?
o Are all drain pipes and ditches clear and without blockages?
o Are the rainwater gutters clear of debris?

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Ø Is the labeling on hazardous materials in compliance with industry and government regulations?

Ø Check the aisles:

o Are the aisles wide enough to offer safe passage for forklifts?
o Can forklift operators perform their tasks with the propre safe clearances?
o Are all aisles in the warehouse clearly marked and identified, enabling workers to know where to store specific materials?

Ø Storage Racks

o Are all storage racks clean and damage-free?
o Are the racks stacked properly and safely in the storage areas?
o Is the height of the pile right so that goods bundles will stay without toppling?

Ø Is the loading bay safe?

o Are there any obstructions?
o Can the doors be opened smoothly?
o Check the forklifts and other vehicles – are they in working condition?

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Ø Inspect Staircases

o Are there proper railings in place? If not, they should be installed to prevent falls

o Are all staircases similar in height and design? If not, there should be sufficient warning to prevent workers from tripping because they expect staircases to be similar.

o Do the stairs have guardrails installed to prevent falls?

Ø Forklift truck safety

o Are all the forklift drivers properly trained and qualified?
o Have they undergone refresher training and evaluations?
o Daily inspection of forklifts is necessary prior to take-off to check for any damage
o Are the goods placed in the right manner before operations?

Ø Docks

o Check if docks are free of clutter
o Are dock edges safe for carrying loads?
o Are there adequate signs warning people to stay away from the docks?
o Set low speed limits and ensure forklift drivers stick to that in the area

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Ø Conveyors

o Is there adequate protection provided between the conveyor belt and workers so that clothes or any part of the body or hair will not get tangled?

o Are the precise procedures for locking followed during repair and maintenance of the conveyor belt?

Ø Materials Storage

o Are the gangways and passages clear and well-maintained to prevent slips and falls?
o Are the loads positioned evenly and correctly?
o Are heavier loads stacked on the lower shelves
o Ensure that only one load is removed at a time

Ø Manual Lifting and Handling

o Is it possible to minimize the need for manual lifting?

o Can engineering design techniques be implemented to improve conditions and eliminate overexertion and unnatural movements?

o Are workers trained in the right ergonomic postures to maintain while moving loads, to prevent fractures and damage to muscles?

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Ø Hazardous Chemical Safe Handling

o Is there a proper hazard communication program in place?

o Have the workers been properly trained to identify hazardous chemicals, handling, storing, and disposing them properly?

o Do they know the right protective equipment to be used for handling these chemicals

Ø Charging Stations used for refueling or recharging of driven equipment (petrol, LPG, or battery)

o Are they far away from all open flames?
o Are adequate fire extinguishers available and in good working order?
o Are ‘No Smoking’ Signs prominently displayed, and is this strictly implemented?
o Does the area have sufficient ventilation so that harmful gases are distributed?
o Do workers have facilities for eyewash and shower in the event of exposure to acids and chemicals?
o Are enough number of quality PPE sets available to the workers?

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Ø Equipment Under Voltage

o Has a proper lockout tagout program been implemented to shut down live equipment properly and prevent workers from getting trapped between machine parts or getting electrical shocks?

o Are all the employees working with such equipment properly trained on LOTO procedures, and in their use and removal post maintenance?

Ø Personal Protective Equipment – Are workers using the right PPE for the tasks they are performing?

Ø Are all the tools and equipment being inspected regularly? Is it properly documented?

Of course, there could be other matters that need to be checked, depending on the type of products your business deals in, and the type of warehouses you have. But these are the most important things you need to take care of.

Tranquil ERP is a powerful solution that can help you conduct and keep track of warehouse inspections, enabling you to maintain compliance with safety regulations and provide a positive work environment for employees. Do schedule a FREE demo to know how Tranquil can help your business – we are happy to answer all your queries.