F. Curtis Barry & Company Blog

Distribution & Supply Chain Insight

FedEx Announces Layoffs as Volumes Decline

This week FedEx announced its quarterly earnings, and the results weren’t good, further highlighting the decline in shipping volumes. Partly due to the decline in ecommerce volumes, FedEx stated that it will cut 25,000 workers by May of this year. These efforts are to try and streamline costs in efforts to boost profitability.

This is on the heels of layoffs in the broader freight markets.  Per the WSJ - trucking, warehousing and parcel-delivery companies cut a combined 16,900 jobs in February, following a drop of 2,200 jobs in January, according to seasonally adjusted preliminary employment figures released Friday by the U.S. Bureau of Labor Statistics.

Economically, we are certainly in some grey areas, where even the most intelligent economic minds are unsure of what will happen. Most recently, MarketWatch published an opinion piece on the feds ability to execute a soft landing with the economy, and the chances of stagflation. To understand the potential impacts of stagflation on retailers and supply chain models, we first need to understand what stagflation means.

3PLs play an integral part of many ecommerce and wholesale distribution supply chains. But if your company has ever researched costs, you will find that no two vendors have similar models when it comes to storage fees. Understanding how vendors charge for storage can be difficult, especially if you are starved for data.  

At a high-level 3PL storage costs follow one of two pricing models, on demand type storage, and dedicated space models which are more fixed cost. To understand which model is more advantageous for your ecommerce business or whole distribution, we need to look at each option further.  

Peak season brings unique supply chain and operational challenges that are not experienced at other times of the year. The need to improve warehouse operations during non-peak times is critical. It can be very difficult to improve order fulfillment during the peak season. However, just because you can’t make changes, it doesn’t mean you shouldn’t be looking for changes to make.

Most distribution center operations have seen significant increases in warehouse labor costs, as well as all time high lease costs for a new facility. These factors have driven more companies to consider warehouse automation to remain in the current facility longer and reduce the labor costs. These two cost components can radically increase your cost per order. However, this does not mean that companies should simply employ automation without achieving a cost-effective warehouse automation ROI.

One of the first aspects in determining the warehouse automation ROI is to ensure that the automated solutions being considered are realistic for your business. Many companies begin their process with some “YouTube shopping”, becoming enamored with a certain automation system. That skips over any detail consideration of current process, systems and costs.

Labor is typically one of the largest distribution expense items, along with freight costs, for most companies. According to Indeed.com, the job employment website, the average base pay for warehouse workers is $16.78 in the U.S. However, when you factor in benefits such as healthcare, training and more – the fully loaded cost balloons to $28.86 per hour. Companies typically have the following costs over and above the base pay:

• Benefits and healthcare: 35% of payroll costs
• Workers comp and unemployment: 8% of payroll costs
• Training: 4% of payroll costs
• Recruitment, hiring and HR: 25% of payroll costs

In today's challenging and competitive world, your success can hinge on whether your warehouse operations are productive and effective enough to meet customer expectations. 

One way to gauge how effectively your warehouse operations meet those expectations is to conduct a warehouse operations assessment. 

A warehouse operations assessment, also known as a fulfillment center audit, is a systematic review of all warehouse functions and possible efficiency and service improvements. Keep in mind, that if you cannot measure something, it is difficult - if not impossible - to improve it. 

One of the most important pieces to managing your operations is to understand how your workers are performing, how costs are trending, and what to do based on what the data is saying. For companies that are just beginning to implement metrics and KPIs, the task can seem daunting. For companies that have utilized benchmarking for quite some time, they might have benchmarking that needs to be reviewed and evaluated. Consider these 10 aspects to improve your internal benchmarking programs.

Many retail and ecommerce companies are feeling more pressure to reduce time in transit to the end customer, pushing the operations to provide options for supporting this. Being closer to the customer in general is a good thing, but for many companies, this can lead to disaster. Because of the complexity, it’s easy to under-estimate the order processing, WMS, and process changes required; recruiting and hiring costs; additional inventory investment and the financial implications.  

It’s not uncommon for businesses to commit to multi-DC, only to have disastrous results which can cost the business significant cash and erode the customer base, or worse, put them out of business. Our objective isn’t to dissuade companies from going multi-DC, but to identify the risks, costs and where companies fail to properly plan and execute.

It can often seem overwhelming to try and find that one spare part needed in the vast sea of inventory that is the spare parts warehouse. As warehouse and stock room consultants, we see it all too often, thousands of parts in inventory with no real plan to store or organize them efficiently.

It may seem like it will never get better, but with the right storage solutions, your spare parts warehouse can be an organized and well-oiled machine, just like the ones your parts help to fix and maintain. There are many different solutions that range in cost and complexity. There is something available for all size parts and all size inventories.