Blog Posts Strategic Steps to Improve Distribution Network Performance
In today’s ecommerce marketplace, high-velocity distribution centers are increasingly considered to be “strategic assets of a retailer’s business,” according to Jason Tolliver, head of logistics and industrial research for the Americas at Cushman & Wakefield.
With its potential to significantly impact cost and service, companies should closely scrutinize their distribution network to ensure optimal effectiveness. To aid in that process, Saddle Creek Logistics Services’ recently published a whitepaper on trends in the design and management of distribution networks.
In addition to finding the optimal configuration and considering common DC network challenges, there are a number of areas where companies can make meaningful adjustments to improve network performance.
Following is an excerpt from the 2018 Distribution Network Trends Report…
Fine-Tuning Operations
When it comes to network design, there are ample opportunities for improvement related to warehousing, transportation and general operations.
Warehousing Practices
“We’re seeing logistics clients becoming more strategic in how they utilize space and assets,” says Saddle Creek Senior Vice President Tom Patterson. “Changes at the warehouse level can lead to a significant improvement in the bottom line.”
Examples of common warehouse improvements include:
- Designing facilities to handle increase in SKUs and variety of order profiles under one roof (multi-level storage, racking systems, etc.)
- Adding small-parcel shipping lines and stations
- Adding “slow-moving” or “bulky item” sections to the DC
- Custom engineering warehouse processes
In addition to facility improvements, Patterson says companies are also incorporating strategies such as cross-docking – the practice of receiving product and shipping it out the same day or overnight without putting it into storage.
“Companies find that cross-docking allows them to take costs out of their supply chains and accelerate the velocity of inventory, so they can get their products to market more quickly and economically,” Patterson says.
Postponement strategies can also play a role in network optimization. From embroidering t-shirts to creating rainbow packs to making minor mechanical alterations, many companies choose to customize products late in the production cycle.
Positioning value-added services as close to the customer as possible allows companies to delay product configuration until the last possible moment. That allows them to be more responsive to customer demand, speed time to market and avoid the cost of carrying and managing a heavy volume of safety stock, Patterson explains.
Transportation Management
“Companies continue to look for creative solutions to help control transportation costs,” says Patterson. He cites an example of a manufacturer that was regularly shipping between its warehouses coast to coast. “By using intermodal instead of truck, they cut costs by 42 percent. For another client, changing packaging and product design helped to increase freight density and, thereby, lower freight costs.”
The multi-site distribution model helps to address growing demand for fast, free shipping. Other transportation strategies include:
- Transportation routing
- Negotiating rate changes and fuel surcharges
- Shipment consolidation
- Leveraging postal work-share options (i.e., presorting and drop-shipping)
- Planned shipping volume
- Zone skipping to specific sortation hubs
- Reducing frequency of deliveries
- Shipping direct from vendor
- Increasing use of intermodal
Patterson notes that changes in transportation are often more attractive for companies to implement because they can have a direct, immediate impact on the bottom line while brick-and-mortar changes can take longer to become apparent.
Download Saddle Creek’s 2018 Distribution Network Trends Report to learn more about strategic network configuration.