More Information: https://flevy.com/browse/flevypro/warehouse-costing-cleansheet-analysis-5509 Warehousing costs at most firms are extraordinarily higher than they ought to be. Across the world, organizations spend around €300 billion annually on Warehouse Management. With the boom in online retail stores and the increasing complexity of Supply Chain Management, this spending is going to surge further. The leadership at these organizations understands that they should spend less on Warehousing operations, but is not aware of the real costs associated with it. Most leaders are unable to tell how much is their human resources cost per facility. Lack of appreciation of true Warehousing operations costs is one of the main reasons for failure of most Business Transformation programs. Without this knowledge, the leadership is unable to comprehend where the improvement areas lie and how much value creation can be achieved from those. Ascertaining these costs warrants a clear approach, which many organizations lack. Most firms inquire about their operational costs from 3rd party Logistics (3PL) providers — by soliciting requests for quotations (RFQs). However, this does not give an idea of what these principal activities really cost. The most common approaches to Warehouse costing include: Benchmarking Cleansheet Analysis Benchmarking The Benchmarking method uses a top-down approach to analyze costs based on industry benchmarks. However, accessibility of benchmarks at lower levels is hard to access, since benchmarks available for comparison are predominantly at high levels — e.g., Total Warehouse Cost as a proportion of Cost of Goods Sold. Industry Benchmarking fails to take into consideration distinct product or service offerings. Cleansheet Analysis Cleansheet (or a Bottom-up Analysis) is a more comprehensive method to estimate Warehousing costs. It is a numerical approach to ascertain precise costs of critical components of Warehousing operations, including facility spread out, workforce, and equipment. This method facilitates in understanding where the cost exceeds and how it can be eliminated. The focus of the Cleansheet Analysis is on determining the lowest possible cost of each major element, and comparing it with the actual cost being paid. Identifying the lowest costs of major elements allows the organization to determine the most problematic areas and confront major cost inconsistencies. The Cleansheet Analysis comprises of 3 main steps: Ascertain Critical Parameters Perform Bottom-up Calculations Determine Ideal Throughput Metrics

1. 2/24/2021 How to Perform Warehouse Costing Using Cleansheet Analysis? | by Mark Bridges | Feb, 2021 | Medium
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How to Perform Warehouse Costing Using
Cleansheet Analysis?
Mark Bridges 14 hours ago · 4 min read
Warehousing costs at most firms are extraordinarily higher than they ought to be. Across
the world, organizations spend around €300 billion annually on Warehouse
Management. With the boom in online retail stores and the increasing complexity of
Supply Chain Management, this spending is going to surge further.
The leadership at these organizations understands that they should spend less on
Warehousing operations, but is not aware of the real costs associated with it. Most
leaders are unable to tell how much is their human resources cost per facility.
Lack of appreciation of true Warehousing operations costs is one of the main reasons for
failure of most Business Transformation programs. Without this knowledge, the
Open in app

2. 2/24/2021 How to Perform Warehouse Costing Using Cleansheet Analysis? | by Mark Bridges | Feb, 2021 | Medium
https://mark-bridges.medium.com/how-to-perform-warehouse-costing-using-cleansheet-analysis-64c7b692f6fb 2/5
leadership is unable to comprehend where the improvement areas lie and how much
value creation can be achieved from those.
Ascertaining these costs warrants a clear approach, which many organizations lack.
Most firms inquire about their operational costs from 3rd party Logistics (3PL) providers
— by soliciting requests for quotations (RFQs). However, this does not give an idea of
what these principal activities really cost. The most common approaches to Warehouse
costing include:
Benchmarking
Cleansheet Analysis
Benchmarking
The Benchmarking method uses a top-down approach to analyze costs based on
industry benchmarks. However, accessibility of benchmarks at lower levels is hard to
access, since benchmarks available for comparison are predominantly at high levels —
e.g., Total Warehouse Cost as a proportion of Cost of Goods Sold. Industry
Benchmarking fails to take into consideration distinct product or service offerings.
Cleansheet Analysis
Cleansheet (or a Bottom-up Analysis) is a more comprehensive method to estimate
Warehousing costs. It is a numerical approach to ascertain precise costs of critical
components of Warehousing operations, including facility spread out, workforce, and
equipment. This method facilitates in understanding where the cost exceeds and how it
can be eliminated.
The focus of the Cleansheet Analysis is on determining the lowest possible cost of each
major element, and comparing it with the actual cost being paid. Identifying the lowest
costs of major elements allows the organization to determine the most problematic areas
and confront major cost inconsistencies.
The Cleansheet Analysis comprises of 3 main steps:
1. Ascertain Critical Parameters
2. Perform Bottom-up Calculations

3. 2/24/2021 How to Perform Warehouse Costing Using Cleansheet Analysis? | by Mark Bridges | Feb, 2021 | Medium
https://mark-bridges.medium.com/how-to-perform-warehouse-costing-using-cleansheet-analysis-64c7b692f6fb 3/5
3. Determine Ideal Throughput Metrics
Let’s dig a bit deeper into the initial step.
Ascertain Critical Parameters
The first step of the Cleansheet Analysis entails scoping the Warehousing facility’s
configuration, work, team, volumes, and orders. Specifically, this includes evaluating:
The workforce, accountability distribution, workloads.
The actual warehouse activity levels.
The volumes.
The volume drivers — number of SKUs, order patterns, order lines.

4. 2/24/2021 How to Perform Warehouse Costing Using Cleansheet Analysis? | by Mark Bridges | Feb, 2021 | Medium
https://mark-bridges.medium.com/how-to-perform-warehouse-costing-using-cleansheet-analysis-64c7b692f6fb 4/5
Interested in learning more about the steps to using a Cleansheet Analysis? You can
download an editable PowerPoint presentation on Warehouse Costing: Cleansheet
Analysis here on the Flevy documents marketplace.
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5. 2/24/2021 How to Perform Warehouse Costing Using Cleansheet Analysis? | by Mark Bridges | Feb, 2021 | Medium
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