Today, many companies that ship goods have a prime opportunity. They can leverage a comprehensive, integrated warehouse and distribution solution that streamlines operations, improves efficiencies and saves money.
What is fueling this trend? Facing pressures from every direction, organizations that transport products are confronting challenges that range from higher shipment volumes to smaller orders to constantly changing customer demands. Driven by the booming e-commerce sector and the omnichannel distribution trend, these and other obstacles are pushing companies to find the right combination of capabilities, speed, accountability and accuracy in their warehouse and distribution operations.
Turning to third-party experts
Knowing that this perfect combination can be hard to establish and orchestrate internally, more companies are turning to third-party experts to manage the labor, logistics and technology that makes their warehouse and distribution operations tick. Doing so leaves the manufacturer, distributor or retailer to focus on what it does best: run and grow its core business without the burden, expense and risk associated with today’s high-pressure distribution environment. It is important to consider that a company setting up its own warehouse, distribution and logistics environment — and then staffing it up and equipping it with technology — winds up robbing its core business of resources. The time required to do all of that would be much better spent running, growing and scaling up the business.
Another key point is that today’s tight labor market can make it especially difficult for companies to scale up their warehouse and distribution operations. Finding the skilled warehouse worker who will stay in place and not move jobs for a few cents more per hour is getting more and more difficult.
That level of labor instability can impact the entire distribution operation, particularly when companies put time and effort into recruiting, hiring and training those individuals only to see them walk out the door in a short amount of time. This “revolving door” scenario can take a toll on companies’ resources, assets and bottom lines.
Issues that go beyond labor
There are additional issues that go beyond labor. One is that, historically, supply chain, warehousing and distribution have been “back-burnered” in favor of other services. This makes it difficult for companies to get their fulfillment operations up to speed quickly and efficiently. These operations are not the typical manufacturer’s core service, which is primarily focused on making, selling and marketing products. Figuring out how to ship them is a separate consideration.
As a result, the supply chain as a whole hasn’t been given the same level of importance as, say, manufacturing or customer service. That’s changing now as during the last 10 years more companies have been investing in supply chain management and optimization tools.
But even with these tools at their avail, logistics managers have had to sharpen their pencils and come up with new ways to manage inventory (i.e., figuring out what needs to be manufactured in order to meet customer demand), optimize their physical operations and get products out the door faster (and in smaller quantities).
Ensuring that they have the adequate amount of inventory and safety stock on hand that mirrors their production schedule is a huge challenge for warehouse managers right now. Compounding this challenge is the need to keep up with the sales commitment to get the product distributed after it’s manufactured — getting that product out when it needs to get out.
Becoming a real burden
Factoring in the entire supply chain cycle, the many different elements that come into play during the fulfillment and distribution processes aren’t getting any easier to manage internally. There are so many different key components to manage from a warehousing perspective, including inventory management, optimized order picking and transportation selection — all while adhering to expected service levels. These are just some of the key demands. Consequently, handling all of this in-house has become a real burden for companies across all industries.
So, how can enterprises deal with these and other challenges that must be solved in order to effectively thrive in this e-commerce/digital fulfillment environment? One answer is that companies can ease their burden by teaming with a managed services provider that has the expertise to implement an integrated warehousing and distribution solution. The bottom line is that outsourcing these non-core activities can pay off in many different ways for a variety of stakeholders.
An integrated solution in action
With this in mind, let’s examine a real-life example of what an integrated warehousing and distribution solution looks like in action.
When a large manufacturer approached us for help, it was struggling under the pressures of a changing distribution environment, grappling with a lack of skilled labor and trying to manage with inefficient processes.
The company was having a particularly hard time with labor management, due to working with seven different temp agencies across its manufacturing and distribution facilities.
Managing that labor approach was an onerous task that included communicating with the temp agencies, figuring out where to best allocate the temp employees on any given day, keeping schedules straight and finding coverage for employees who called in sick. It was a very challenging situation, and the first charge was to create a plan to stabilize that labor environment.
On a very tight schedule
Running a large pick-and-pack parts area that was crucial to its manufacturing operations, the company needed to be able to produce a set number of new models every year. That put the firm on a very tight time schedule for getting its products approved and into the mass production process — both of which relied on the smooth running of its warehouse.
A key point is that when you have a compressed timeframe within which to get things picked from the warehouse environment and delivered to the production areas, any delays in that process put the production workers behind. When those delays happen on a daily basis, the costs can start to add up.
What also adds up is the amount of sick time that warehouse employees use during any given week — a number that in our experience can be as high as 20% for some companies. If you have a 100-person staff, that means you’re down to 80 workers on any given day, which can create significant instability.
That instability was addressed by bringing in a more reliable, skilled workforce than any temp agency could offer — and all from a single source (versus seven different providers). This helped the manufacturer reduce its production turn times while also ensuring that more final products were completed within their allotted timeframes.
Integrating a warehouse management system
It all began in the warehouse, with labor, expertise and technology related to process efficiencies for picking. This included integrating a warehouse management system (WMS) into the company’s existing enterprise resource planning (ERP) system.
Along with improved labor management and better process flows, the manufacturer’s key “wins” include cost reduction, less lost or misplaced inventory and much less downtime for its production line. The ability to stay operational and fluid translates into real cost savings for this large manufacturer, where downtime can translate into tens of thousands of dollars per day in lost productivity.
Navigating the “perfect storm”
Facing challenges that include a national skilled labor shortage, a booming e-commerce market and a customer whose needs and demands change almost daily, operators of modern-day warehouses or distribution centers have found themselves in a “perfect storm” of sorts. Saddled by physical facilities that weren’t meant to handle the rigors of e-commerce, for example, and the need to implement technology (yet little clue as to which investments will yield the best return on investment), companies increasingly are turning to third-party experts for help, as noted previously.
To the company that is buckling under the strain of current distribution, fulfillment and labor market challenges, a good first step is to consider a managed services provider that has experience in conducting an onsite assessment. This will not only help ascertain the key operational challenges, but also point out areas of potential improvement and opportunity.
Many companies are not fully aware of what their challenges are, or the extent to which they are negatively affecting the business. With the right help and the right approach, a company can dig down into the issues that are holding its operations back — and that are making its customers unhappy — and implement real, money-saving solutions that allow the company to compete more effectively.