Jul
Logistics is More Than Just the Movement of Freight
All too often, people confuse logistics with the transportation of goods from A to B via ground, rail, air, or sea. It’s important to understand that logistics as a function of an organization also includes (or should include) warehousing and distribution functions.
In particular, it should include the overall distribution center network, which consists of the various distribution centers set up throughout an organizational footprint that serve a company’s locations and those of its customers and partners.
When a company’s distribution center network is operating at optimal levels, there are numerous financial and customer satisfaction benefits realized. For example, the most obvious is that facilities are receiving goods on time and as promised and are then able to get them into consumers’ hands efficiently.
This means more goods can be sold sooner, which means more revenue generated sooner. Optimal performance also means that key metrics and benchmarks established to monitor the network have been fine-tuned to achieve the best possible results. This can also be a competitive advantage.
A fine-tuned distribution center network means companies not only benefit from strong logistics now but also that they can take a proactive approach to competing. If a company had to constantly focus on fixing shortcomings in its network, the capacity for forward-thinking efforts would be impossible.
However, the failure to operate at optimal levels has an adverse effect on profitability, cost control, inventory levels, return on assets, and customer service levels — just to name some of the more significant effects. Clearly, this can be a competitive disadvantage.
10 Questions for Evaluating Your Distribution Center Network
When Brady Partners is engaged to do distribution center diagnostic work, we frequently find a disconnect between the perceptions of senior executives about actual performance levels versus the realities that the people doing the work are dealing with on a daily basis.
If you haven’t reviewed or assessed your distribution center network for some time, it may be that now is the time to ask some hard-hitting questions. Here are just some of the questions to ask:
- Do you perceive your existing warehousing and distribution capabilities as competitive advantages? Do your salespeople and customers agree? If so, what are those advantages, and are they aligned with the advantages that your front-line personnel perceive?
- Are your warehousing metrics aligned with the metrics used in your annual operating plan? Do they reflect the way customers measure your performance?
- Are labor hours and performance tracked by task (receiving, put-away, replenishment, picking, shipping, etc.) and/or by order? Do the people doing the work know how they’re doing?
- Are engineered work standards being utilized for measuring your labor performance?
- Does your annual distribution/warehousing spend as a percentage of sales rank you as best-in-class? Do you know where you rank?
- Does your annual distribution/warehousing/outbound transportation spend rank you as best-in-class? Do you know where you rank?
- Are there SKU allocation/commit “shortage” conflicts for customer orders? How are “shortage” conflicts managed? Are decisions made quickly and wisely?
- Are your customer backorders as a percentage of total customer orders at best-in-class range? Do you know your total cost/order and expenses caused by backorders?
- Are excess/obsolete inventory levels as a percentage of total inventory levels at best-in-class range? Are they going up or down? Is someone/some system managing them?
- How many “Priority 1” IT requests are currently outstanding for warehousing and distribution? Do you have any idea when these will be completed?
Get the Answers You Need to Improve Performance
Knowing the truth about the answers to these questions can reveal whether your supply chain performance is a competitive advantage — or disadvantage — with customers. This can also be the difference between good and bad financial performance, and that matters greatly to your business. Isn’t it time to know the answers?
If you’d like to learn more about the types of distribution center network questions that you should be asking as well as the metrics we’ve helped companies develop and evolve, we’re here to help.
Contact us today to learn how we can help you achieve the results you’ve been looking for.