Some days you might feel like you’re caught between the proverbial rock and a hard place. Like clockwork, carriers increase their charges. The competition is absorbing more of their shipping costs and offering “free” shipping. The customer’s “point, click and deliver” mentality is here to stay.

Amazon, with DCs in almost every state, can deliver to 44% or more of the US population in 4 hours or less. CEO Jeff Bezos says Prime members -- who get free 2 hour delivery on some products -- now exceed 100 million globally. It has become routine for millions of shoppers to buy commodity items like paper products, soft drinks, pet products, etc., avoiding trips to the store.

The cost of shipping and the time to get the package to the customer affects many customers’ decisions to buy from your business. As these trends continue, multiple distribution centers may be the best bet to reduce shipping costs and deliver faster to the customer. As an alternative to internally managing additional facilities, we recommend companies evaluate the use of 3PL as a major way to reduce start up investment and shorten the schedule. You may be able to reach 80% of your customers in 1-2 days via ground from two strategically placed centers.

However, multi-DC strategies are not the right strategy for every company because of the added expenses, inventory required and managing a second remote center. 

This title of this blog might sound naïve considering S&H’s high cost to direct-to-customer businesses and the time companies spend on discussing it. Let me give you two examples to show you maybe there is additional homework companies need to do before changing policies.

In many cases, businesses are holding on to their installed order management system or ERP for more than 10 years – sometimes 15+ years – if they believe they’re the right fit. On the face of it, this is sound thinking; considering the time and expense involved in implementing a new system.

Your order management system or ERP may be right for your call center, the merchandisers’ management of inventory, accounting systems and integration with your web platform. But are your fulfillment system requirements the same as they were 10-15 years ago? For many businesses, the answer is a resounding no.

Maybe you’re being too conservative by expecting incrementally greater productivity from your distribution center’s warehouse management system each year without additional functionality. In most companies, direct and indirect labor accounts for more than 50% of the total cost of fulfillment, excluding cost of shipping. People productivity in a DC is largely based on the feature/function set designed into the systems.

Summer time is here, the kids are out of school, time to hit the pool, right? I know that you don't want to hear this, but it is prime time to conduct an operational audit to identify those areas needing improvements. Believe it or not there are only 5 months left before the Holiday season is here again! Make certain that you have ample time to implement your fixes, develop strategies and plans for the distribution center. What are the objectives you and your management team have set for improving operations this year?

Here are a few areas to look at for your operational audit in order to determine what changes will be most beneficial to your distribution center and operations: 

Problems:

Outbound cost of shipping now averages 6% to 8% of the average order (often much higher for somebusinesses), exceeding fulfillment labor costs. Carriers can also add over 90 accessorial charges, and there is no end in sight. Consumers take shipping & processing (S&P) rates into account in their purchasing decisions, with these charges among the top reasons for cart abandonment.

Solutions:

There is always a lot to keep in mind when dealing with your company's freight contracts and shipping rates - both LTL/TL and small parcel. We feel like there is a need to keep a few points in mind when looking at your LTL/TL inbound freight rates and to continuously strive to make improvements. Below, we have introduced a few of those points. We have  briefly outlined the current freight market, listed a few cost saving opportunities and mentioned how you can get a confidential, no-charge freight rate audit to benchmark your current cost of shipping. 

We all know we’re coming out of a tough business climate. With many companies ramping up for fall and holiday seasons, there is an urgent need to increase productivity and reduce costs without having to make major capital purchases to do so. Here are some supply chain strategies to reduce your cost per order, increase capacity without expansion, and improve service levels in your supply chain logistics. The source of this information is experience gained in our supply chain consulting work with multichannel companies, as well as from the Supply Chain Summit.

Perform an Operational Audit

A warehouse assessment is a great starting point. Warehouse assessments will identify your needs, and help recognize potential improvements to process, layout and use of space, staff productivity, warehouse management system (and peripheral systems) and freight analysis. The objectives are to lower the cost per order, increase storage capacity within the existing center, reduce inbound and outbound freight costs, and improve service levels and turnaround times.