Warehousing isn’t a new supply chain innovation. It dates back to the days when European explorers created shipping routes with trading partners across the oceans. Incoming goods from faraway locations needed to be stored as they came off ships, thus the development of storage facilities known as warehouses.
Today, warehouses, also known as distribution centers, are much more than simply storage facilities. They are an integral part of the supply chain that drive value through strategic logistics processes that boost efficiencies and business performance. Cross-docking, tighter inventory control via postponement strategy, transloading and load optimization are all examples of how cargo can be handled strategically to maximize supply chain performance.
Although many companies still own and operate their own DCs, there is a growing trend in the number of companies outsourcing the management of their facilities to third-party logistics providers. According to a recent Tompkins Supply Chain Metrics Report, which includes survey results from more than 100 companies in nine industries, more than 30 percent of DCs are fully outsourced. Why is this trend occurring, and what are the benefits for companies?
It may be that companies find it’s best to focus on their core competencies and find it more effective to let expert logistics management companies manage the specific, niche warehousing/DC business area. This critical supply chain link encompasses a wide range of strategic processes that can be used to optimize supply chain performance and increase a company’s competitive advantage in the marketplace.
With a 3PL at the reins of a warehouse, companies have a company that’s knowledgeable and experienced when it comes to implementing distribution practices that will improve productivity and supply chain efficiency. There are numerous performance areas within a DC that, when performed at the highest level, can enhance supply chain execution significantly. Some of these areas include load optimization, picks per hour, cost per container (cost to load and unload a container) and pallet creation. When innovative distribution processes are implemented, companies can effectively increase speed to market, reduce inventory, and simplify and shorten supply chains.
As an example, let’s look at “load optimization,” the outbound loadability of cargo. By optimizing a load, filling a 53-foot tractor efficiently at a level equal to or above 95 cubic meters, there are meaningful benefits that can’t be ignored. Efficient loading reduces inland moves, resulting in significant cost savings, and less trucking means there is less impact on the environment because of fewer emissions. With best-in-class load optimization practices, efficiencies increase, and a company’s supply chain carbon footprint is reduced.
Similar benefits can be achieved with cross-docking. This involves unloading incoming ocean containers at the DC and loading materials directly into outbound trailers, with little or no storage in between. Freight effectively moves from three 40-foot containers into two 53-foot trailers. Less fuel and resources are used, reducing costs and harmful exhaust. Cross-docking also allows the shipper to decide the location of its shipments at the last possible moment, allowing it to be more responsive to market demand and stocking requirements. This results in greater efficiency and optimal inventory levels.
Why do you need a 3PL to handle your cross-docking? With a 3PL, you’ll have a knowledgeable partner that has the expertise to cross-dock freight more effectively and with greater flexibility. The size of a DC labor force varies depending on the volumes moving through the facility, so a 3PL is able to deliver a more flexible and cost-effective management of labor force requirements. Overall, the result is a smooth-running cross-docking operation at a reduced cost.
Another business area that impacts the productivity of the DC is labor management. By recognizing and acting to address the physical demands of a DC’s work force, a company can improve the work environment by maintaining a clean, safe and comfortable facility. Workers will be more inclined to deliver the results and output companies desire if their needs are met. Setting high standards with a keen focus on safety is critically important to the management of a productive warehouse/DC.
Today, DCs are not simply storage facilities. They are an important supply chain process center that, when managed well, safely and for optimal results, improve a company’s business performance and increase customer satisfaction.
Nick Taro is president of Damco Distribution Services. Contact him at 973-514-5212, or at firstname.lastname@example.org.