Warehousing facilities play a vital role in the overall supply chain process. Fundamental for warehouses to achieve both efficiency and effectiveness in supply chains, and provide some perspective on current challenges and the future.
It is evident that continuing globalization and changes/challenges occurring in such areas as reverse logistics, environmental sustainability, information technology, and overall supply chain integration are further evolving the strategies, roles, and responsibilities for warehouses.
In fact the term “Distribution center (DC)” may be much more appropriate in representing the broad range of activities that now occur in modern warehouses that go beyond filling customer orders to provide an ever expanding array of value added services.
There are a number of situations where DC’s simply would add cost (and little or no value) to the supply chain. DC’s add little or no value for products bought in bulk (e.g. raw materials, manufactured items) with little or no time sensitivity associated with their use. Products insensitive to transportation costs (i.e. transportation cost is a small percentage of product value) also typically move directly to customers.
For other products, however, DC’s provide a dual value-added role making supply chains more efficient and more effective. DC’s add efficiency by consolidating products for shipment to customers, reducing transportation costs, and performing a broad range of value added services (e.g. branding, labeling, assembly, packaging, kitting, reverse logistics). DC’s also make the supply chain more effective. The strategic placement of DC’s allows the positioning of products and services close to major markets and customers (the economic principle of place utility).
Optimization strategies are utilized to position product availability and delivery as a competitive advantage while also optimizing the cost trade-offs associated with transportation, facilities, equipment, workforce, and other critical cost variables. DC’s also facilitate time utility by storing product until it is demanded.
Product type often determines the need for and specific role of DC’s in the supply chain. Characteristics to be considered include:
- SEASONALITY in either PRODUCTION or CONSUMPTION
- DEMAND VARIABILITY
- MANUFACTURING ECONOMICS
- MARKETING and PROMOTIONAL INITIATIVES
- TRANSPORTATION ECONOMICS
- SERVICE REQUIREMENTS
- CUSTOMIZABILITY and VARIANTS of PRODUCT
Company capabilities to determine DC requirements are essential for achieving successful networks and operations. DC requirements include location, design and operations, determining the information and technology requirements, and measuring performance.
In addition to transportation costs DC location is determined based on the the location of major markets and customers, the location of supply points, the volume of product moving to or from supply points and customers, transportation rates, the level of service required, and the product characteristics. Local conditions including access to and cost of labor, land and buildings, IT/communications infrastructure, transportation infrastructure, and government policies (e.g. environment, incentives, taxes) also play a significant role in determining location.
Design & Operations
The product, how it is received, the nature of customer orders, service levels, and transportation mode are the primary determinants of distribution center design and operations. Product characteristics include weight and dimensions, packaging, shelf life, temperature and lot control requirements, and hazardous material requirements. How the product is received is critical to both inbound operations efficiency (dock to stock cycle time) and space utilization/storage efficiency.
To optimize efficiency in inbound operations it is ideal to receive material in an immediately storable conveyance (e.g. pallet, case, box). The types and volumes of orders that are processed and the number of stock-keeping units (SKU’s) in the DC are important considerations in determining layout, equipment selection, and business process requirements. Storage equipment selection should be matched to product characteristics, volume, and any additional unique requirements (e.g. security, temperature control, lot control).
Benchmark has grown significantly over the years, and we’ve continually invested in our supply chain management services, which includes critical, diversified, and global partnerships with material suppliers, shipping partners, and logistics experts. We’re also committed to maintaining a talented in-house team dedicated to the supply chain. In fact, Benchmark is among the few complex technology solutions providers across the world with proven capabilities in every area of supply chain management. What does that mean for you and your business?
The Benchmark Difference
The most important aspect of our supply chain management services is that Benchmark has a stake in the outcome. We’re deeply invested in our customer’s entire product development process and go-to-market strategy because we engage with customers for the long term.
Because our customer engagements cover end-to-end services ranging from product development to after-market support, we’re always forward-thinking when it comes to the success of the product. A failure in the supply chain affects our customer’s success as much as it does ours and that’s why we’ve always got a finger on the pulse of production as well as the materials and commodities markets.
Organizations that offer only supply chain management rarely incur this exposure. As a result, their services follow a set process that doesn’t account for disruptions on a global scale. While they may try to mitigate some risk, they work with a limited number of vendors. This means that costs can be unnecessarily high, and flexibility is limited. Either way, it can be a costly mistake, as the supply management partner is already getting paid, so they may not go the extra mile to ensure success.