Three strategies for assessing your warehousing and distribution plan
If your downstream supply chain needs help, you’re not alone. Suboptimal warehouses, worker shortages, complex processes or outdated technology are some of the most common culprits, not to mention the disruption caused by e-commerce and other competitive threats.
It can be tempting to tackle whatever’s causing the most angst. Too often, though, companies stitch together solutions until the supply chain resembles a patchwork quilt—not the sleek and scalable engine needed to propel a company into the future.
“It’s important to make incremental moves to stay in step with changes, but each one should be part of a larger plan,” said Nancy Pagley, UPS business development director supporting customers with warehousing and distribution operations. “Companies in this space are facing some very big decisions which has slowed down their evolution.”
Those decisions may be investments in enterprise or warehouse management systems, automation, data analytics and the possible restructuring or relocation of facilities and people. Barriers also may be embedded in the culture and mindset of business leaders, however, and those will be the slowest to change.
These three strategies can help.
1. Find ways to break the inertia
Long experience in warehousing and distribution can be a game-changing advantage, but might also prompt inaction on the part of business leaders.
“Most often we see companies overhaul their operations in response to some kind of catalyst,” Pagley adds. “Change for whatever reason can be good, but being reactive increases the chances of taking a costly wrong turn.”
Pagley has seen numerous instances where companies were caught off guard by change. An infusion of low-cost automotive aftermarket parts left manufacturers scrambling for efficiencies so they could better compete on price. Industrial distributors—experts at fostering personal relationships—were slow to recognize the importance of e-commerce to their survival, even as channel competition and customer expectations were increasing around them.
“Fundamental change is difficult because what’s state of the art today may not be state of the art tomorrow,” Pagley said. “And the investment needed is often far outside a middle-market company’s reach. But sometimes standing still is riskier than taking that first step.”
Pagley suggests companies looking to evolve faster should consider outside help from a provider offering scalable warehousing and distribution services. Contracting for services often provides access to more advanced technology and advantageous locations with less capital investment and financial risk.
2. Embrace your customers’ new normal: ease, convenience and flexibility
Operators have spent years building customer loyalty through personal and attentive service. Only recently have many found the formula for loyalty has changed.
Today, once the basics of quality and price have been satisfied, ease and convenience become the order of the day. That means most customers want things like e-commerce, better supply chain visibility, process flexibility, faster response times and greater cost efficiency.
“Most operations were designed based on historical knowledge that cannot necessarily deliver on what customers need today,” said Simon Bhadra, senior manager for the UPS Industrial Distribution customer segment. “There are valid business reasons that customers demand changes from their intermediaries, or are bypassing them altogether. Pressure to cut costs, reduce turn times, for example.”
Bhadra explains that operators struggle to balance operational efficiency with demand for individualized services and a good e-commerce experience that, today, are the necessary building blocks of sustained customer loyalty. “But how far can you go with one-off processes before your other customers start to suffer?” Bhadra asks. “There is a tipping point, especially for companies with more manual processes.”
Change is happening. A 2016 study of warehouse professionals by technology company Zebra showed 75 percent planned to move to a “more modern, full-featured warehouse management system” by 2020. Of those planning changes of any kind, most cited transportation costs and response times as major drivers. By 2020, those surveyed expect the most dramatic technology changes to involve barcode scanning and the Internet of Things. They see the biggest warehouse management-related expansions happening in cloud computing and yard management.
Bhadra acknowledges that the scope of change underway makes it difficult for leaders to be sure they’re focused in the right places. He notes that consulting with their logistics provider consulting with their logistic provider can help companies take an objective look at how well they’re meeting customer needs and establish benchmarks for key supply-chain metrics.
“It’s really critical that operators set aside the knowledge they’ve amassed on customers in order to get a fresh look at what’s going on out there,” Bhadra said. “It takes unconventional thinking to lead the pack nowadays.”
3. Know who you are, where you’re going and what makes you different
It’s a rare business that doesn’t sometimes suffer an identity crisis. If it’s not the drumbeat for cost savings driving process change, marketplace growth and direct-to-consumer selling are changing go-to-market plans and blurring the lines between friend and foe.
Clearly, the pace of change demands a more iterative approach to decision-making than ever before. But those iterative decisions could be easier and more efficient when guided by a long-term strategy.
Take the example of U.S. go-kart and mini-bike maker, Monster Moto. The company’s “Assembled in America” label is a guiding principle, but it faced challenges with its parts operation in China due to language, time-zone difference and a slower response to slight assembly process variations.
In a series of whiteboard sessions, UPS helped Monster Moto find solutions for moving parts from China to a new, 100,000 square foot plant in Ruston, La., where it assembles, warehouses and then ships finished bikes to retailers and consumers.
Efficiency also factored into the equation. “A single ocean container could hold 219 completed mini-bikes,” said Alexander Keechle, Monster Moto chief executive officer. “If the units were unassembled with engines in one container and frames in another, we can surely surpass 219. If all we achieve is a 50 percent increase, up to 330 units, our transportation cost will go down.”
As was true with Monster Moto, a company’s solid understanding of who they are can reduce the number of doors to look behind before making decisions and investments. A vision of the future is key.
“What will your warehousing and distribution operations look like in 10 or even 20 years?” asks Mark Modesti, a consultant with UPS Customer Solutions. “It’s okay to learn down the road that you were wrong. As long as you plant a flag and build a dynamic roadmap that lets you adapt as needed, you’ll be ahead of the game.”
Explore your warehousing and distribution options with UPS Contract Logistics here.
