Almost 25 years after the rise of warehouse management solutions to drive increased customer service levels, there still remain a significant number of Tier 1 distribution-intensive companies that continue to use manual processes to support a growing demand on the warehouse.
There are major facilities – with warehouses in excess of 1.0-million sq. ft. – that have not yet taken advantage of productivity and accuracy driven by an integrated, extended supply chain.
With B2C setting the standard, B2B is at the point where it can take outcomes from B2C to drive significant improvements in productivity.
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Here are three areas where increased warehouse efficiencies are driving supply chain improvements in 2015:
1. On-shoring
As wages and other offshore costs normalize, coupled with lower fuel costs and on-shore streamlined distribution models, industry experts believe we will see a swing back to on-shoring (or re-shoring) of manufacturing and distribution.
In fact, 54 percent of executives from billion-dollar U.S. manufacturing companies said they hope to soon shift production to the U.S. from China, according to a 2014 survey by the Boston Consulting Group. Just 37 percent of executives expressed that same view a year earlier.
On-shoring will bring renewed focus on reducing shipping costs and time-to-market objectives, thus driving warehouse efficiencies.
2. Asset Light 3PL’s
As economies change, the demand for 3PL services can rapidly increase. This in turn has created a need for “Asset Light 3PL’s,” which don’t own any assets. Once customers sign up with this type of 3PL, they are typically committed to the services and fees for two to three years. The 3PL leases equipment, space, and hires short-term contract employees to support the immediate need. This reduces the capital expenditures and expenses as a direct result of not owning anything. The result is a low cost, highly configurable model with a focus on productivity and customer service, while keeping margins competitive.
3. Warehouse and Distribution in a New Light
There are several components that need to be addressed if a company truly wants to improve its overall supply chain relative to business objectives: integrated warehousing, and the transformation of distribution from an expense basis to a strategic tool.
As long as warehousing is seen as an afterthought and viewed as a minor step in a business process, the supply chain will never truly align with a company’s broader strategy. After all, if a product is not managed according to customer requirements and shipped on-time, then the supply chain is broken.
Meanwhile, integrated warehousing is not just about integrating the supply chain process, but also about examining how distribution is viewed. Typically, distribution is viewed as an expense and managed in the way cost is managed – tightly with little flexibility to do what is best for the business vs. what is most cost effective.
A strategic approach to the warehouse and distribution functions will better align the supply chain with a company’s broader business strategy.
On-shoring, Asset Light 3PLs, and strategic warehousing and distribution can be the drivers that translate to better visibility, planning and automation, enabling companies to realize supply chain productivity gains in 2015 and beyond.
Tim Conroy is General Manager of the Americas at IBS, a global provider of distribution resource management software, providing ERP and WMS business applications for the wholesale, distribution and manufacturer/distributor markets. For more information about IBS, or to contact Mr. Conroy, email [email protected].
