The cost of distribution center and warehouse space has taken a big tumble, which could translate into savings for you and your company.

A combination of factors have driven down per-foot rental costs by as much as 40% in some cases, managers report. Today’s economy has reduced the need for space, which increased greatly over the past few years as demand rose.

Dropping prices have triggered three different reactions:

• Smaller companies have jumped ship to new quarters when their current lease expires.
• Companies have been able to bargain for lower rates while the lease is still current, and
• Companies that no longer need as much space can consolidate and lease extra space to others.

In some cases, companies have even sold the building they’re in and moved to cozier digs.

There’s also the savings that can come with housing and handling less inventory. Some companies will get used to that and keep conducting business the same way, even after the economy rebounds.

Regardless of your current situation, there’s at least a chance that the cost-saving issue could surface for consideration.

Maybe you’ve recently heard something similar to this sentiment about improving operations in your distribution operations.

They might be asking you to upgrade or increase inventory space or reserve space — but don’t count on extra money to do it.

Of course, there is no one best way to store inventory.

The best system considers many factors:

• what you’ll be handling
• how you’re expected to move it
• your existing facility capacity
• staffing
• money available, and
• expected ROI

There are five basic racking systems. Each has its own advantages and disadvantages.

• Single deep racks — Most popular and widely used. Advantage: accessibility. Disadvantage: less storage density.
• Double deep racks — Two back-to-back racks that are two pallets deep. Advantage: increased storage density. Disadvantage: “Honeycombing” possible if there are varying SKUs.
• Drive in/Drive through racks — Advantage: High density storage that can eliminate “dead” space. Disadvantage: First in/last out set-up makes stock rotation difficult.
• Pallet flow racks — Advantages: First in/first out; high density, easier to maintain. Disadvantage: Steeper pricing.
• Mobile racks — Advantages: Good for especially tight storage areas; needs only a single aisle.

Sure, maybe if you’re 10,000 or so cases of inventory per shift, then you might want to slap the cash on the barrelhead.

Otherwise, you can get by with far less.

By adding something as simple as a basic layer of automation — such as an oval conveyor belt — you can reduce the required head count for getting product from the shelves to the shipping area. The whole concept pays for itself in about 30 months, experts say.

There’s still a manual sorting system, fed by by the re-looping conveyor belt with access to picking areas. The key is batch picking, which saves time and money as trips are logically consolidated.

The consolidated cartons are put on a conveyor belt, which feeds into the looping system. Then, as the cartons slowly chug by the packing area, workers pull what’s necessary for each order. They build each order — manually — then label and stack the packages on nearby pallets. From there, the packages easily pass through the loading area and out of the building.

If packers miss an item or two, the product will be re-circulating shortly and the packer can pull what’s needed without leaving his or her spot. Everything’s at his or her fingertips, without making additional picking trips.

Experts say a system like this save can quickly pay for itself, as it will free the time four to six workers would otherwise rack up in labor costs. Those workers can be deployed in other areas.

The return on investment can be accelerated, by increasing the workload of the packing process. Such growth can occur without requiring any additional expenses.

Why isn’t this approach finding more favor?

Consultants and system sellers have a vested interest in selling you the biggest package possible. Hardware providers prefer larger projects, which lead to larger profits.

One of the biggest problems with this boomerang effect is the time it takes for distribution centers to figure out what to do with returned goods. After all, the primary goal is to get goods out of the door.

Hence, reverse logistics.

As fast as you can ship out a product, it can be headed right back to you. The better prepared you are to handle such situations, the more smoothly your distribution center will function.

The fact that many businesses are willing to pay someone else to take care of this tells you it’s a valuable service. And if someone’s willing to pay an outsider to come in and do it, why not do it yourself and save the money?

Time is the single greatest enemy to handling reverse logistics. Processes grind to a halt and distribution center employees are forced to research and make decisions for each item or product that comes back in your door.

There’s a two-step solution for this:

• Identify the categories/reasons for return, and
• Have a plan in place for how to deal with each category.

There are seven core reasons for returns:

• manufacturing problem
• service problem
• recalls
• end-of-life
• obsolete
• end-of-use
• problem under warranty

Once you’ve determined the core cause for return, it’s easier to drop it into one of six “asset recovery disposition” buckets:

• restock to resell
• refurbish
• destroy
• repackage to resell
• sell to secondary market, and
• return to manufacturer.

Once your distribution center has developed working criteria for each disposition, it’s much easier for any staffer to handle returns.

You’ll save time, decrease frustration, and get returned goods on the way to where they’re supposed to be.