15 Ways to Reduce Supply Chain Logistics Expenses
Through the hundreds of supply chain consultant projects we have worked on, F. Curtis Barry & Company has compiled the following quick-hitting supply chain strategies titled “15 Ways to Reduce Supply Chain Logistics Expenses”. Here is a summary:
- Efficient receiving. Inventory accuracy and product flow through the warehouse all start with receiving. The single biggest improvement companies can often make is to develop and implement vendor compliance policies.
- Reduce freight costs. Outbound freight now exceeds direct labor in many warehouse and distribution centers. Don’t be too proud to ask a consultant to reduce freight costs and to help negotiate new contracts, even if it’s on a gain share basis. Too many dollars are at stake.
- Put away. Look to reduce warehouse back orders and “can not finds” which may cost anywhere from 20 to 60 minutes to resolve.
- Slotting. Efficiency techniques include “hot pick areas” for fast selling products. The old 80/20 rule holds for product sales.
- Order Picking. Reduce the picking time—70% of picking time is walk time in the warehouse—by using the proper approach to fit your business (e.g. singles, cart/bin, batch pick and sort, zone pick, etc.). In many businesses, singles are more then 50% of the pick volume.
- Reduce number of replenishments. Hold the equivalent of a week’s unit volume in the forward pick.
- Packing. Picking and packing amount to more than 50% of direct labor costs in the warehouse. Put packing supplies adjacent to the stations, and ensure you have the proper number of insert compartments, sufficient table top square footage, and adjustable height pack stations.
- Returns processing. Returns cost more than orders. Eliminate the controllable reasons for returns (e.g. picking errors, copy and art errors, etc.). Streamline the receiving process to get returns processed efficiently, and refunds or exchanges back to the customer quickly.
- Inventory Control. Inventory is the largest balance sheet asset in most businesses. Without accurate inventory you can’t have sales or move orders efficiently in the distribution center. Use aisle mapping (proper location of product without counting) frequently.
- Bar code scanning. May be the most underutilized technology in our industry. Maximize its use from dock receiving, to put away, to picking, pack confirmation, shipping, returns processing, inventory control and cycle counting. Speed product and order flow through the center. Increase inventory accuracy to 99.9%.
- Effective warehouse layout. Look to increase capacity within the same facility and streamline product and order flow.
- Work standards and measurement. You can’t improve that which you haven’t measured. Apply benchmarking principles to set up internal benchmarks. Use external benchmarking to understand what other companies achieve, and for best practice ideas.
- Management of labor. Labor is more than 50% of the cost per order for call center and warehouse.
- Developing a world-class team. There are 11 key issues you need to resolve, including staff empowerment, delegation, hiring competent people, recruiting and training the person who will take your place eventually, etc.
- Use third party logistics. F. Curtis Barry & Company’s clients have used third party logistics more in the last five years than in the prior 12. Internal costs have increased to the point where, for many companies, on a total cost per order basis it’s cheaper to use third party logistics. Additionally, they avoid having to invest in infrastructure such as supply chain logistics and order management systems and warehouse management systems, and have reduced management of fulfillment, call center and IT. They can instead concentrate on the critical areas of marketing and merchandising.
If you’re interested in more information on supply chain strategic possibilities, contact Jeff Barry at jbarry@fcbco.com, or call (804) 740-8743. F. Curtis Barry & Co. is a national consulting firm that works with eCommerce, catalog, retail, manufacturing and wholesale distributors on projects focusing on supply chain strategies, order management systems, warehouse management systems, inventory management, third party logistics, and to reduce freight costs.
Order management software, Supply Chain Strategies, Third party logistics, Warehouse Management System
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