I’ve recently completed a survey titled Warehouse Performance Improvement. I had two key partners, DC Velocity and eft (eyefortransport).
An executive summary of the overall results will be published in DC Velocity in May. DC Velocity’s summary will mostly focus on what shippers can do to improve performance.
I’ve just started the analysis, but in today’s post I will provide some high level results for the 3PL sector. There were 150 respondents overall, 49 from the 3PL industry. We asked 3PL respondents, which location, people, process, or technology practices most improved cost performance (as measured by distribution costs per unit shipped)? Location refers to a change in warehouse location in order to reduce labors costs, taxes, or transportation costs.
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When taking into account all their attempts to improve cost performance over the past five years, our 3PL respondents most frequently reported that process changes were the best driver of cost improvement.
When it comes to process changes, there are a variety of tactics available. Most frequently the process change reported is the implementation of a continuous improvement program.
All respondents that implemented a continuous improvement, also known as operational excellence (OpX), reported driving down their distribution costs per unit shipped. Over 20 percent OpX respondents reported driving costs down by more than 10 percent in the first year after the program was implemented. And almost 90 percent of respondents said that this was not a one time gain, by using OpX processes they were able to drive down costs year after year.
The payback period our 3PL respondents got on their continuous improvement programs were excellent. Nearly 78 percent reporting a payback of less than one year. In contrast, the aveage payback period for supply chain software technologies is about two years.
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Further, these cost improvements did not come at the expense of service performance. 85 percent reported that continuous improvement programs allowed them to improve their service. Only 15 percent said service remained the same after putting OpX into effect.
This survey has a lot of data. I’ve just begun the analysis. I will speak at eft’s 3PL Summit & Chief Supply Chain Officer Forum, which takes place from June 16th through the 18th, where I will present more detailed results relating to the tactics that have been most successful for 3PLs in improving warehouse performance.
Finally, it is also worth mentioning, I’ll be participating in a webinar this Thursday hosted by eft titled Airbnb for Warehousing? – New Business Models, Innovation, and ROI. The webinar starts at 12:30 PM EST and is scheduled to last 45 minutes.