Supply chain strategy is often designed to eliminate or reduce warehousing. While this trend will no doubt continue as a means to lower total costs and improve efficiency, warehousing can still play an important role and add value. Here are some key areas for managers to consider in improving warehouse operations:

SUPPLY CHAIN STRATEGY:

A major factor in supply chain strategy is inventory turnover. Warehouses enable effective positioning of inventory to support supply chain strategy. This includes raw materials, components for manufacturing, and finished goods inventory. Sound location theory is needed to determine the best warehouse site.

 

BRIDGE BETWEEN 20^TH AND 21^ST CENTURY MODELS:

Old model characterized by use of intermediaries (middlemen) and staging of inventory throughout the supply chain. Newer model eliminates some nodes and reduces inventory. Faster cycle times put more pressure on logistics systems. This means that positioning of inventory is more important in the newer model.

 

VALUE ADD:

Old logistics models focused only on efficiency and cost control. The challenge for whse mgrs is to achieve efficiency, control costs, and add value. This is done through improving cycle time and managing fulfillment operations.

 

CONTRIBUTION TO PROFIT  +/- :

Bulky commodities tend to occupy the most space in a warehouse and require labor to handle. These commodities usually carry lower value per pound and therefore lower profit margins. They may also be in the mature or declining product life cycles. Warehousing of these products must be efficient to avoid profit drain.

 

 

FINANCIAL CONSIDERATIONS:

Big factor in warehouse decision making is price of real estate. High tech distribution centers with automated handling systems are capital intensive. Labor markets are important to the location decisions. These are examples of strategic decisions made at higher levels of management.

 

PROFESSIONALISM:

While training does exist, there are very few college courses in warehousing. Some literature exists but few text books. Therefore opportunities exist to professionalize the field.

 

 

 

MANAGEMENT:

Most warehouses are labor intensive and variable costs are critical. The whse can be used to provide good front line management experience for new managers. Mid level managers may also be assigned to the whse because of reorganizations and downsizing and their experience can be valuable. The whse should not be used as a dumping ground for problem employees. This will result in lower professionalism.

 

 

LOGISTICS IMPROVEMENTS:

Logistics improvements can be high level supply chain integrations, mid level coordination between manufacturing, marketing, and other intra company functions, or basic improvements in functions. In most companies the warehouse can benefit from some basic improvements. Small changes can have a big impact and can be implemented easily.

According to Logistics Management magazine many over the road trucking companies are considering or in process of converting operations to intermodal.  There is no question that more traditional truckload and LTL traffic, especially longer haul, is moving on the rails. While these changes can result in significant cost savings and efficiencies, the barriers to conversion are formidable.

 

 

Elements of Intermodal

• TOFC/COFC   piggyback
• Landbridge
• Efficiencies compared to OTR
• Changing OTR role to more regional service
• 3PL’s to coordinate movement via multiple modes
• Mode choice function of total cost, accessibility, speed, capabilities

KPI’s for both OTR and Intermodal

• Correct Invoicing
• On Time Delivery
• % damaged shipments
• Equipment availability
• Turndown ratio

OTR Issues

• Driver shortages
• Tight capacity
• Fuel costs
• Rationalize demand/supply

OTR Advantages

• Flexibility/accessibility
• Speed
• Best option up to 600-700 miles

Trends in OTR

• TL carriers getting into Intermodal business
• Shortening length of haul to best use assets (trucks and drivers) and reduce fuel costs
• Comparison w/Intermodal measured by miles (600-700) or “1 driver, 1 day”

Contact Ad Hoc Logistics for details about:

• Intermodal and OTR Customer Requirements for all companies and specific requirements for small, medium, and large shippers
• Barriers to conversion from OTR to Intermodal

 

 

Here is a basic outline for negotiating/evaluating 3PL contracts. It should be noted that this outline is a starting point and tactical in nature. It does not address higher level 3PL performance such as full integration with client business strategies and C level involvement.

• Overview– 3PL should use knowledge and buying power to get best price/terms for services needed
• Analyze–  Existing agreements, pricing, invoicing practices, benchmark
• Plan/Organize– RFP development and/or improvement, vendor and carrier evaluations, negotiation strategy, what if scenarios
• Execute– Implement cost savings plan, re-negotiate existing contracts, develop problem solving protocols
• Control– Ongoing audit and reporting, regular status reports, quarterly review with vendors and carriers to hold accountable for contract terms

 

Common shipper client complaints:

– Not getting 3PL A team

– Surprise costs

– Lack of ideas and innovation from 3PL

– Lagging in technology

 

While 3PL’s want to be more strategic they are often seen by clients as tactical operators and cost reducers.