Executive Briefings

Warehouse Logistics: Preparing for the Best of Times by Managing through the Worst

Analyst Insight: For most companies, the management focus on order fulfillment concerns cost-containment. To lower operating expenses, companies should look to both cost savings (via efficiency gains) as well as cost avoidance (via accuracy improvements). Making these changes in the short term can yield long-term benefits, as those improvements that save costs now can also position companies to better handle the greater volumes that will follow a rebound in consumer demand.

Concerns over operating expenses dominate the discussion of warehouse operations. While there is a push for greater efficiency, many companies are not looking toward traditional material-handling equipment for improvements.  For these gains, companies are planning to implement more efficient processes, and to support the effort with lower-cost/quicker-payback technology upgrades.

When comparing performance across maturity classes, some of the big operational differentiators between Best-in-Class companies and their peers hit on this point specifically: greater utilization of advanced picking and replenishment methodologies and a centralized direction of warehouse activities. Both require the collection and manipulation of accurate inventory and location data, as well as integration with order management. For relatively immature operations (with a continued reliance on spreadsheets for managing warehouse activities), this may be particularly difficult.

Another area where the high-performers stand out from the pack is related to added value for downstream customers, specifically the ability to provide electronic ASNs and to pre-print customer-compliant labels for outbound product. Though we see these differences across all types of companies, these capabilities prove especially important for the 3PLs in Aberdeen's research community.

When looking at what processes set high-performing companies apart, the Best-in-Class also lead the way with higher utilization of both slotting and interleaving.  Not surprisingly, these are two of the most-cited areas for future improvement. Again, the focus at present is on the optimization of internal processes, with the aim of reducing operational costs.

The Outlook

For the near-term, most companies will focus on internal process improvements.  Based on recent findings, we expect an uptick in implementation of supporting technologies (ruggedized mobile devices, RF scanners for less mature operations, voice, etc.) rather than big-ticket investments. At this point, companies simply appear reluctant to chance a big loss, even if the long-term ROI case of a larger investment seems sound. If process improvement is capped by the limits of existing software systems, there may also be an increase in either component upgrades or in-house customization for those operations with adequate internal IT resources.

Concerns over operating expenses dominate the discussion of warehouse operations. While there is a push for greater efficiency, many companies are not looking toward traditional material-handling equipment for improvements.  For these gains, companies are planning to implement more efficient processes, and to support the effort with lower-cost/quicker-payback technology upgrades.

When comparing performance across maturity classes, some of the big operational differentiators between Best-in-Class companies and their peers hit on this point specifically: greater utilization of advanced picking and replenishment methodologies and a centralized direction of warehouse activities. Both require the collection and manipulation of accurate inventory and location data, as well as integration with order management. For relatively immature operations (with a continued reliance on spreadsheets for managing warehouse activities), this may be particularly difficult.

Another area where the high-performers stand out from the pack is related to added value for downstream customers, specifically the ability to provide electronic ASNs and to pre-print customer-compliant labels for outbound product. Though we see these differences across all types of companies, these capabilities prove especially important for the 3PLs in Aberdeen's research community.

When looking at what processes set high-performing companies apart, the Best-in-Class also lead the way with higher utilization of both slotting and interleaving.  Not surprisingly, these are two of the most-cited areas for future improvement. Again, the focus at present is on the optimization of internal processes, with the aim of reducing operational costs.

The Outlook

For the near-term, most companies will focus on internal process improvements.  Based on recent findings, we expect an uptick in implementation of supporting technologies (ruggedized mobile devices, RF scanners for less mature operations, voice, etc.) rather than big-ticket investments. At this point, companies simply appear reluctant to chance a big loss, even if the long-term ROI case of a larger investment seems sound. If process improvement is capped by the limits of existing software systems, there may also be an increase in either component upgrades or in-house customization for those operations with adequate internal IT resources.